1) When I convert the house to condos, do I have to recapture the depreciation then or can I delay that until I sell the rental unit I moved into? It is delayed.
2) If I sell the rental unit I have lived in for 2.5 years, will I get a full $500,000 reduction The word is exclusion not reduction and although you can use the exclusion again after 2 years the depreciation recapture will still need to happen ... it cannot be excluded. https://www.irs.gov/publications/p523
Recapturing Depreciation
If you used all or part of your home for business or rental after May 6, 1997, you may need to pay back ("recapture") some or all of the depreciation you were entitled to take on your property. "Recapturing" depreciation means you must include it as ordinary income on your tax return.
