Deductions & credits

The situation is complicated because I don't know if you can voluntarily split the exclusion of yourself and your spouse for #2.

I think this scenario would work:

You sell home #1 first.  You, but not your spouse qualify to exclude up to $250,000 of gain.  Since the gain is expected to be $150K, you are covered.  Then later, you sell #2.  You are disqualified from using any exclusion because of the 2 year rule since the last exclusion.  Since you are disqualified, but your spouse is not, you can file jointly and your spouse can use their $250,000 exclusion to cover the $200,000 gain.

Also note that in this scenario, if the reason you sell #2 is that you or your spouse find a new job more than 50 miles away (your new commute must be 50 miles longer than your old commute), then your spouse can use their full $250K exclusion and you would qualify for a partial exclusion, even though you had used your full exclusion less than 2 year prior.  Your partial exclusion would be based on the length of time since selling #1.  This might help if the market goes up and your gain is more than expected.

I think this scenario would not be allowed:

You sell home #2 first, and chose to voluntarily only use your spouse's exclusion, even though you both qualify.  Then later, you sell #1 and use your personal $250,000 exclusion.

I don't think this works because I don't think you can voluntarily choose to not apply your exclusion to home #2 if you file a joint return and if you are still allowed an exclusion.  The trick is to disqualify your exclusion on #2 by using it on #1 first.

If you must sell #2 first, your spouse could use her exclusion, and you could decide not to use your exclusion, if you filed married filing separately for that year.  As long as you don't live in a community property state, your wife could treat the entire $200K gain as her taxable income, and claim the exclusion.  You would not include the home at all on your MFS tax return.  However, filing MFS usually results in owing more income tax, because some important deductions and credits are limited or disallowed.  And if you live in a community property state, you must report the income 50/50, meaning you would pay capital gains tax on $100K, so that you could save your exclusion to use on #1 with a gain of $150K. 

If you move back to #1 as your main residence, you are hit with the non-qualified use rule no matter when you move back or how long you live there.

Yes, you also have to recapture your depreciation when you sell #1.

It sounds like you definitely want to sell #2 first and move back to #1, so lets focus on that.

Scenario 1:

Sell #2, file MFJ, and claim the full exclusion ($500K, although your gain is only $200K.  Your gain is tax-free.  Then when you sell #1, you first pay income tax (recapture) on the part of the gain that is due to depreciation you took or should have taken when the home was a rental.  Let's guess that's about $20,000.  Then of the remaining gain ($130K), 53%  ($68,900) is ineligible for the exclusion, so you pay long term capital gains tax.  The other 47% ($61,100) is eligible for the exclusion.  If you don't have a qualified hardship, you pay tax on that too, because you used your exclusion on #2 less than 2 years prior.  So your taxable gain is $130,000 as LTCG and $20,000 as recapture.  If you sell because you took a new job more than 50 miles away, the both spouses can use a partial exclusion, which in this case would be 6 months since the prior sale / 24 months = 25% x $500,000 = $125,000.  Since the partial exclusion is more than the qualified gain, you end up paying tax on $20,000 recapture and $68,900 of non-qualified gain.

Scenario 2:

Sell #2 and file MFS for 2023.  Your spouse reports all the gain (if you are not in a community property state) and used her exclusion.  The gain is tax-free, but you may pay higher income tax due to the difference in tax rates and qualifications for deductions and credits.  Then when you sell #1, you first pay income tax (recapture) on the part of the gain that is due to depreciation you took or should have taken when the home was a rental, we guessed $20,000.  Then of the remaining gain ($130K), 53%  ($68,900) is ineligible for the exclusion, so you pay long term capital gains tax.  The other 47% ($61,100) is covered by your exclusion, because you didn't use it on #2. So you pay income tax on $20,000 recapture and LTCG tax on $68,900 of non-qualified gain.  You don't have to qualify for a hardship in this situation. 

However, if you live in a community property state, then in scenario #2 you must report $100,000 of the gain on your MFS tax return, and if you choose not to use your exclusion, you will pay LTCG tax on that gain.