The gain seems to be excludable. You must have both owned and lived in the house as your main home for two of the five years prior to sale. Your dates of ownership and residence are not clear.
You said, "In my situation, the rental time did not happen within the 5-year period prior to sale."
However, as Amelie's Uncle noted, any portion of the gain that is attributable to depreciation recapture is not included in the exclusion.
If you meet the qualifications to use the exclusion, any gain over that amount is a capital gain. The exclusions are $250,000 for single, and $500,000 for married filing jointly. See the rules below.
Does Your Home Sale Qualify for Maximum Exclusion
The tax code recognizes the importance of home ownership by providing certain tax breaks when you sell your home. To qualify for these breaks, your home must meet the Eligibility Test .
How your sale qualifies. Your sale qualifies for exclusion of $250,000 gain ($500,000 if married filing jointly) if all of the following requirements are met.
- You owned the home and used it as your main home during at least 2 of the last 5 years before the date of sale.
- You didn’t acquire the home through a like-kind exchange (also known as a 1031 exchange), during the past 5 years.
- You didn’t claim any exclusion for the sale of a home that occurred during a 2-year period ending on the date of the sale of the home, the gain from which you now want to exclude.
