Military service (or being overseas on orders as a civilian) suspends the five-year clock by up to 10 years. That means that, since you moved out in 2021 and would normally be required to sell the home by 2024, you can extend that up to 2034. However, I’m not sure how the extension operates if you return to the US in 2027. You probably want to sell the house before 2027 just to be safe, although another expert may have a more clear view on that.
One definite mistake would be to move back into the home and begin using it as your main home again when you return to the states in 2027. If you move back into the home, you run into an issue called “nonqualified use” which would make a large portion of your capital gain no longer eligible for the exclusion. The idea of the exclusion is that if you move out, and then sell without moving back in, you can use the full exclusion. But if you move out, rent for a while, and move back in, you can’t use the exclusion to convert the taxable capital gain due to the rental period into non-taxable capital gain. Moving back into the house would defeat the exclusion. You want to sell it without moving back into it, possibly by 2034, and possibly by 2027.
Also note that, even if you qualify for the exclusion, you must pay depreciation recapture tax on the depreciation that you claimed or could have claimed during the period of time the home was a rental.
You don’t submit any proof when you file your tax return that you qualify for the extension due to military service or civilian orders. Keep whatever proof you have with your other important tax papers for as long as you own the home plus 3 years after you sell, in case of audit.
