@john1922 wrote:
or do I need to go with prorated exclusion which is 6/12*$250,000 = $125,000
Yes, you have six-ish years of Nonqualified Use. However, the exclusion doesn't work the way you stated.
For simplicity, let's say your Nonqualified Use is exactly 50% of your total ownership period. In addition to the tax due to the gain from depreciation, 50% of your gain will be taxable.
The other 50% of your gain (not including the gain due to depreciation) is able to be excluded, up to $250,000 ($500,000 if married filing jointly).
Does that make sense?
