Capital gains question

[Brett Lee]

I am trying to figure out if I would have to pay Capital Gains on a house. The house when's our primary home and then we rented it out for three years before moving back. So we have lived in the House 2 out of the last five years but they are not consecutive. Can anybody help me out with being able to definitively figure out if we can sell this house without capital gains or not? I would appreciate any insights or input you have. Thank you very much

[Michael Plaks]

Originally posted by @Joshua Thompson:

@Ashish Acharya

Is there a safe harbor or something of the sort that allows one to fully utilize the $500k exclusion while still turning the property into a rental at some point?

From a tax perspective what would be a smarter way to turn a primary residence into a rental and utilize as much of the $500k as possible?

Move out, convert into a rental for no more than 3 years, and sell tax-free. Almost tax-free, actually: will have to recapture depreciation taken over 3 years.

The key is to not move back.

There're some complex ways to extend it past the 3 years, but that would require professional help.