from your total gain, the depreciation is subtracted. only the remaining balance is eligible for the home sale exclusion. if depreciation exceeds the gain only the gain amount is taxed as depreciation recapture. depreciation recapture does not matter how long you owned it, how long you rented it, or how long it was your primary residence. it get's taxed up to the gain.
house tax basis b/4 depreciation $300 + land $100
depreciation taken $150
remaining tax basis $250
sold for $450
gain $200
depreciation recapture $150 (75% of gain so 67% is possible)
remaining gain $50 is not taxed due to the $250/$500 home sale exclusion
