Can I still be excluded from the capital gains tax on sale of my home if I rented out a room while it was my primary residence for 2 yrs?

[laraeisaacson]

It was my primary residents for over 2 yrs within 5 yrs of the sale. I've never sold another house. I rented out one room and filed a Schedule E for rental income only while it was my primary residence.

[Carl]

If the entire house was your primary residence for any 2 of the last 5 years you owned it, counting back from the closing date of the sale, then no problem. You qualify for the full exclusion. However, do be aware that the depreciation recapture on the rental portion is not included in that exclusion. So you will pay taxes at the ordinary income rate, on that recaptured depreciation.

[laraeisaacson]

Thank you! There may be an error in TurboTax's form then because as soon as I put that I rented a portion, it said I am not eligible for the exclusion.

How do I figure out the recaptured depreciation? Is that Schedule E (form 1040) line 18. TuboTax is not autofilling, so I'm not sure where to get that info.

[ColeenD3]

Go back over your entries and make sure they are all correct. If you are entering the sale in Sale of Home, you will be asked about the rental portion, but make sure you are answering the exclusion portion correctly.

You can look back at your depreciation worksheet. You would add prior depreciation plus the amount taken in 2021.

[Hal_Al]

Answer no when asked "Did you use this home for anything other than your primary home".  The room rental was only incidental use. 

You will still be asked if you claimed Depreciation after May 6, 1997.  Answer yes, if you did.