@tblasz wrote:
If I rented the property previously and then lived in it the last 2 year before selling, I wouldn't have to pay the capital gains on the $200,000.
If I had $0 income the year I sold the house, I would have to pay 0% of the $100,000 depreciation too?
No and no.
If you used the home for something else before it became your Principal Residence, there are different rules involved and you have "Nonqualified Use". That essentially means that the $200,000 is prorated based on the time it was your Principal Residence and your entire ownership period. For example, if you owned the home for a total of exactly 10 years and you first rented it out for exactly 7 years then it was your Principal Residences for exactly 3 years, you could only exclude 3/10th of it (the actual calculation uses days, not years). So $60,000 would be tax-free, but the other $140,000 would be taxable.
If we temporarily put the Nonqualified Use rules aside, you asked about the tax rate if you had $0 of income with the $100,000 of gain due to depreciation. But you would not have $0 of income - you would have $100,000 of income. You need to INCLUDE the amount of the taxable gain for determining how much is taxable.
