Taxes on selling primary residence that was a rental

[Daniel B.]

Hi,

We purchased a 2 family in 2012 as a rental property. We ended up moving into the larger unit approx June 1st 2015 and continued to rent the 2nd unit. We moved out approx Nov 1st 2018, living there almost 3.5 years. Both units are currently rented again but we are strongly considering selling next year.

We paid $110,000 in 2012 and over the years have done a lot of improvements, cost basis is around $200,000. 1st mortgage is around $150,000, HELOC of $80,000. ARV is currently around $325,000, assume net $300,000 if sold.

Since we lived in it 2 out of 5 of the last years, would we have to pay taxes on the profit? I assume we would on the depreciation we took. How does the fact that it was a 2 family factor in if at all since the whole building wasn’t our primary residence?

Thanks in advance.

Daniel