So, there is an equation for computing gain allocable to non qualified use. It takes
Total Period of Non Qualified Use / Total Ownership Period X Gain on Sale of Property.
If we have only rented the home for the last 5 years, does this calculation not come into play ?
the look back period being five years, and as you say you have had the property for rent for all of those five years -- therefore it will be classed as income property --- no gains exclusion allowed. Where it gets troublesome when you convert a home ( main residence ) to income property, you need to keep track of both the original basis ( acquision cost plus cost of improvements during qualified use) and the FMV at the time of comnversion. Gain or loss is computed using both , further adjusted for allowable depreciation , improvements etc. But TurboTax will walk you through all of these issues. If you need more & specific help, please add your questions as comment
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