BiggerPockets

You're not entitled to a capital gains exemption because you haven't lived in the house long enough. You'll pay taxes on the gain which is the difference between what you sold the house for less any closing costs and basis you have in the house. The basis is what ever you originally paid for the house plus any capital improvements made to the property.

If you rented any part of the property or claimed a home office deduction you will be subject to some depreciation recapture as well.

Chances are after 1 and a half years you have very little tax to pay.

When you close the property you won't have to worry about any federal or state income tax. An adjustment will be made for property taxes though.

At the end of your tax year, you will have to report the sale of the home and income tax will be due on any capital gains.

If there is something specific that you don't understand please ask.

The fact you're using the sales proceeds for a down payment on another property doesn't affect the taxes unless you're doing a 1031 exchange. Since you lived in the one you're selling I don't think this applies.

What you wrote is still not the whole story. How much did you pay for this house? How much were the closing costs? How much depreciation did you take or should you have taken?

Here's how you compute the tax:

Basis = what you paid plus closing costs less depreciation.
Deprecation is the amount actually taken or the amount you could have taken, whichever is larger.
Net sales proceeds = amount you sold it for less selling costs.
Note that the net sales proceeds is not related to any checks you may receive when you sell.
Gain = net sales proceeds - basis
Amount subject to depreciation recapture tax = lesser of gain or depreciation
Amount subject to capital gains tax = gain - (amount subject to deprecation recapture tax)

You'll pay the taxes when you file your 2010 taxes, assuming the sale is this year.