You'll report the sale under the Personal Income tab, Less Common Income section, Sale of Home (Gain or Loss).
Understand that since it was your primary residence for the "last" two years you owned it, not all of your gain will be tax exempt. But a good portion of it will be. You will "really" need to pay attention to the small print as you work this through so that you make the correct selections.
Also, you will need the IRS Form 4562's from the last year you reported this property as a rental. There are two 4562's for the property and you will need them both. They print in landscape format and one is titled "Depreciation and Amortization Report" and the other is "Alternative Minimum Tax Depreciation Report". Without both of those forms from the last year you reported rental income for the property on SCH E, you will not be able to "correctly" report this sale.
Also, as you work this through there is one screen that will have a high probability of confusing you. The screen asks, 'Did you use this home for anything other than your primary home?" Then the small print under that can lead to confusion. particularly the "note" can confuse you. TO clarify, you did "NOT" use this home for anything ***AFTER*** it was no longer your primary residence, because you no longer owned the home after it was your primary residence. So on this screen you will select YES to indicate that you *DID* use the home for other than your primary residence for a period of time ***AFTER*** 2008.
That period of time after 2008 or after you purchased it (whichever is alter) is "unqualified use". So when asked for the number of days of unqualified use, your day count will start on the latter of:
- Jan 1 2009 if you purchased the property *before* that date or
- The day you closed on the sale if you purchased the property after Jan 1 2009.
