If I owned and lived in my house for 5 years and then I rented for the next 4 years. Can I go back to that house so I can sell it later and get the tax exclusion?

[Opus 17 · Accepted solution]

It's complicated.  When you move back after moving out, you no longer get the automatic exclusion for living there 2 years.  You have to account for the periods of non-qualified use.  This is complicated and the current version of IRS publication 523 doesn't explain it, I think the IRS gave up.  (Turbotax calculates it properly.)  The version from 2010 or earlier may explain it.

The whole point is to stop landlords from being able to move back into their house and make their gain tax-free.  Here's how it works:

You lived there 5 years, then move out for 4 years, then move back for 2 years, and sell.  You have 4/11 years of non-qualified use and 7/11 years of qualified use.  So you can only exclude 7/11 of your gain (up to the usual $250,000 or $500,000 limit).  And you still have to recapture depreciation.  

So lets assume you bought for $200,000, claimed $40,000 of depreciation, and will sell for $400,000.  Your overall gain is $240,000.  The first $40,000 is taxed as recapture.  Of the remaining $200,000, 7/11 or $127,000 qualifies for the exclusion and 4/11 or $72,000 is taxed as long term capital gains because it is from a period of non-qualified use.

[Critter]

Yes you can but you will always have to recapture the depreciation taken no matter what.