If you are single, and you lived in the home as your main home for at least two years, you can exclude the first $250,000 of capital gains from your income. If the gain is larger than $250,000, you will have to pay capital gains tax on that portion. You can rent the home for up to three years after you move out and still qualify for this exclusion. But when you sell the home, if the closing date is even three years and one day after you moved out, you will not qualify for the exclusion and you will have to pay capital gains tax on the entire gain. Also, when you rent the home you will be entitled to take a tax deduction for depreciation. That tax deduction must be repaid when you sell the home. It is called recapture of depreciation, and you have to pay tax on the part of your capital gain that is depreciation recapture even if the rest of your gain qualifies for the exclusion.
