@poolshark333 wrote:
....will we still get the $500k exclusion and have a capital gain of $50k ($550k-$500k)?
You will have a period of non-qualified use (2020-2024) which will not be eligible for the exclusion. The period from 2024-2030 would be eligible for the exclusion, however.
See https://www.irs.gov/publications/p523#en_US_2021_publink100072923
In other words, the gain attributable to the 2020-2024 period would not be eligible while the gain attributable to the 2024-2030 period would be eligible (e.g., roughly, 6/10 (or 3/5) of the gain would be eligible for the exclusion).
@poolshark333 wrote:
What happens to the $100k of depreciation that we accumulated from 2020-2024?
The $100k in accumulated depreciation will be excluded from your net gain that is eligible for the exclusion and subject to depreciation recapture (unrecaptured Section 1250 gain). That $100k figure will be taxed at your ordinary income tax rate (but the maximum tax rate is 25% on that $100k).
