despite the fact you did not depreciate it during the rental period, the tax laws require you to recapture the depreciation you should have taken as section 1250 gain when you sell. any gain attributable to 1250 gain is not eligible for the exclusion. the way the computation of the exclusion works the way it works is first the gain is computed. From that, the depreciation you should have taken is subtracted. the lesser of the remaining gain or the home sale exclusion amount is exempt with any remaining gain eligible for long-term capital gain treatment. consult a pro about correcting the depreciation error. it seems there are multiple choices. amend 2022, fix it on the 2023 return. or wait until you sell. form 3115 is used to correct the depreciation error if you want to do it yourself. if you wait 2 years from the date last rented the full exclusion would be available if the gain is large enough after the depreciation recapture.
