Deductions & credits

The rental period is considered nonqualified use, except when rented "after" it was used as personal residence.  

However, based on the question, it appears you have lived in it for at least 2 of the previous 5 years, so it would still qualify as a sale of personal residence.


Report the sale under:

Federal Taxes

Wages and Income

scroll down to Less Common Income

and 3rd from bottom is Sale of Home. 

However, "nonqualified use" does not apply to time that falls into one of the following categories:


1. Periods of time after its use as a principal residence. 

2. Temporary absences due to a change in employment, health or unforeseen circumstances.

3. Any period (not to exceed 10 years) during which you or your spouse (if married) is serving on qualified official extended duty as a member of the uniformed services, the Foreign Service, the intelligence community, or as an employee or volunteer of the Peace Corps.


Here are a few examples:

1. After owning and living in it for several years, you move out of your main home on August 1, 2016, and rent it out for a year before selling it. The time it is rented out doesn't count as "nonqualified use" because it is AFTER being used as a principal residence.