Originally Posted by Helen
What if you rent it but have lived in the house for 2 of the prior 5 years? Does renting for the interm before selling make a difference? The tax guy I spent an hour with didn't mention it and I didn't think to ask.
Living in the house as your primary residence for 2 of the past 5 yrs qualifies you, and spouse if appropriate, to the full cap gains deduction. If it's <2 of last 5 yrs, you don't lose the whole cap gains exclusion; instead, it's prorated. Details are available in the relevant IRS pamphlet.