You will qualify to show the house sold as a principal residence, but will have to adjust the amount you qualify to exclude due to the nonqualified use period when it was a rental and depreciation was allowed or allowable.
Since you rented your home before selling it, then you cannot exclude the gain on the portion of the time the home was a rental property and depreciation was allowed or allowable on your return.
You will have to calculate the amount of depreciation that should be recaptured due to rental use (depreciation) part of the holding period explained in IRS Pub 523.
Please refer to the following for additional information on the reduction in the amount of exclusion you qualify to use on the sale of your home due to the "nonqualified use period":
IRS Pub 523 starting on page 11.
Recapturing Depreciation-
If you used all or part of your home for business or rental (nonqualified use period) after May 6, 1997, you may need to pay back (“recapture”) some or all of the depreciation you were entitled to take on your property. “Recapturing” depreciation means you must include it as ordinary income on your tax return from IRS Pub 523.
For additional information on the reduced exclusion of gain on the sale of the house due to "nonqualified use period" refer to the following link:
sale of home worksheet with depreciation rental adjusts
