Househack capital gains

[John Bohannan]

My wife and I have househacked our basement on-and-off for more than half of the five years we’ve lived at our home. Now it’s time to move.

We may keep it as a rental. Or we may sell. The complications of capital gains may get icky because it’s up 120K and we’ve declared a loss some years. We’re sorting out whether it’d be better to refi.

Question:

If we keep it as a rental for a few years, does that change the capital gains situation or allow a 1031 exchange?