it is, as you say - pretty cut and dry. If you lived in the house and it was your primary residence for any 24 of the 60 months leading up to the time you sold it, you qualify for the $500,000 tax exemption on the sale of the house. Having rented the house part of the time you weren't living there has no effect on the exemption amount. However, because it was a rental, to the extent you have a gain you will be subject to depreciation recapture tax on the amount of depreciation you took, or were eligible to take while it was a rental. For example, if you sold your house for a $500,000 gain, and during the time the house was rented you took (or were eligible to take) $25,000 in depreciation expense), you will owe depreciation recapture tax on that $25,000. The remainder of your gain will be tax exempt.
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