Yes and no. That situation (move back in) is complicated and not well documented in the IRS instructions, although Turbotax will calculate it.
The "move back in" situation is an exception to the general exclusion rule because Congress didn't want landlords turning taxable rental property into tax-free personal property. When you live in the home you own, move out, and sell within 3 years (to meet the 5 year rule) there is no problem. But when you move out and move back in, things get messy.
You have to deal with periods of "non-qualified use". The gain due to non-qualified use is not covered by the exclusion. In your case, if you move back for 3 months and sell, you will have lived in the property for 24 months during the last 5 years, and owned it for a total of 54 months. But 30 months is non-qualified use. So you will owe capital gains tax on 30/54ths of your gain. The 24/54ths of gain that is from qualified use is subject to the exclusion.
So, supposing your gain is $100,000; then $44,000 is qualified and subject to the exclusion, and $56,000 is non-qualified gain and subject to capital gains tax.
In addition, the depreciation you took or could have taken while you were renting the property will be subject to 25% recapture tax in any scenario.
Note that the longer you live there, the higher your percentage of qualified gain. For example, if you lived there 3 more years, you would have 57/87ths of qualified use, meaning you could exclude 65% of your gain up to $250,000.
You would certainly save something if you moved back, its up to you if its worth it.
