Deductions & credits

No, you don't pay tax on the rental income.  But recapture is something different.  I have to go out now, I will try and explain later if no one else does.  

Also, my answer about excluding gain is probably wrong, and you will owe more tax than I thought.  Some of us are talking about it and we will get back to you.  Basically, the problem is that at some point, the IRS decided that if a taxpayer has a rental with a large capital gain, they should not be able to make it tax-free just by moving back in to it for 2 years before selling.  (The tax break was created for homeowners not landlords.)  So they made up some really complicated rules that I think are going to cause you a tax bite.  But we are trying to figure it out and will update you when ready.