Capital Gains with Partial Rental

[Peter Ivanov]

If a house has been owner-occupied by a married couple filing jointly but 1/3 of the house has been rented, do the couple qualify for the $500K capital gains sale tax exclusion?

More details:

House has been owned and occupied for 10 years.

The 1/3 rental is not a separate unit but is contained in the house.

The rental space has been rented for all of 10 years.

Rental income has been reported, taxes paid and 1/3 of the house has been depreciated throughout the years.

[Bob Norton]

@Peter Ivanov Yes, the married couple qualifies for the tax exclusion.  However, they will pay tax on any depreciation recaptured in the sale.  So, their gain will be partially taxed.