Previous rental - Now owner occupy before selling

[Brad Rondeau]

My California condo has been used as a rental for the last 8 years. I will move in this month with plans to stay for 2 years. If I then sell after 2 years ($160,000 gain) - do I pay any taxes on the $160,000?   I've been very confused about this.  Some have told me that if I live there 2 years in the last 5, that I'm home free and the $160,000 gain will be tax free.  Others say only 2 years worth (20%) of the gain will be tax free.  How can I be sure which is the correct answer.  Either way I guess I'll still have to pay CA taxes (9.3%?) and depreciation recapture.

I'm 59.5, divorced, and retired last year, very little income - living off savings etc.  I really am not excited about moving to the condo for 2 years (miss my kids/grand-kids in the midwest).  But if I could wipe out all of the capital gain it might make sense.