You can't claim any exclusion on the house you owned prior to the marriage, because you moved out more than 3 years before you sold. There is no pro-rated exclusion in this case. You would have had to sell before March 2022 to qualify for the $250,000 exclusion.
Start by reading publication 523.
https://www.irs.gov/forms-pubs/about-publication-523
Capital gains is the difference between the selling price and your adjusted cost basis. It may not have anything to do with the actual amount of cash you received, if there was a mortgage to pay off. Your adjusted cost basis is what you originally paid, plus what you spent on permanent improvements (but not repairs, see pub 523) minus the depreciation you took or could have taken when the home was rented. You can also include certain closing costs in your adjusted cost basis.
I don't think you are clear on the difference between improvements and repairs, and any rental expenses should have been deducted against rental income. See pub 523 for more on improvements.
You can reduce the selling price by certain costs of sale including real estate commission and advertising. But you can't include adjustments for cleaning or repairs, those are things all homeowners are expected to do to keep their property in good condition. Suppose that when preparing to sell, you cleaned, painted, and hired a staging company to bring in furniture to stage the open house. Cleaning and painting is not an adjustment to price or considered an advertising cost because it changed the house, but the cost to bring in, rent, and then remove the staged items, would be an allowable advertising expense because the actual house was not changed in any way.
Let's do an example using similar numbers.
- Purchased for $85,000. Had $1000 of closing costs that are allowable adjustments.
- Made $30,000 of improvements.
- Placed as a rental for 4 years. You should have taken depreciation based on a cost basis of $115,000 (minus the value of the land). Over 4 years, your depreciation would have been about $14,000. This will be on your prior tax returns. If you did not take depreciation, you must still include the depreciation you could have taken as an adjustment.
- Sold the home for $300,000, with an $18,000 commission and $4000 of staging expenses.
Your adjusted cost basis at the time of the sale was $102,000. (Purchase price plus adjustments plus improvements minus depreciation.)
Your adjusted selling price was $278,000.
Your capital gains is $176,000.
Because $14,000 of the capital gains is due to recovery of depreciation, that is taxed as ordinary income with a maximum of 22%. The remaining $162,000 of capital gains is taxed at the 15% long term capital gain rate.
