I rented out a room where I live in. Are the capital gain exclusions applicable to me when I sell the house?

Your sale will have two parts to it, the personal and the rental. You can exclude the gain on the entire house, as if it were never rented, if you qualify. However, you can't just ignore the fact that you had a portion as a rental. You will have to recapture any depreciation and that portion will be taxed as ordinary income.

 

In sale of home, you will be asked if you ever used the home for business.

 

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 , which is explained later.

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.

Thank you Coleen! I understand that I will have to pay taxes on the depreciation recapture. 
I do pass the eligibility test. I am only renting a bedroom as explained above. So, this means that I fully qualify for the exclusion?

Yes, if you owned and lived in the house for two of the five years preceding date of sale.