Sale of Rental Property & Capital Gains tax (2-out-of-5 yrs rule)
Thank you in advance forum members. I need clarification on whether the 2-out-of-5-Year Rule would apply in our situation to get full exclusion from capital gains tax.
We live in CA and had purchased a condo in Jan 2005. This was our primary residence and we lived there from Jan 2005 until Nov 2017. It was converted it into a rental property from December 2017 - April 2021.Tenant moved out in April. Since tenant lived there for 3 years 5 months ,we are considering moving back into the condo as our primary residence for 5 months and then selling it in October 2021. That way it would be a primary residence for 2 years out of the past 5 years so we are hoping to get full exclusion on capital gains tax.Is my understanding accurate? Would the 2-out-of-5-Year Rule apply in our situation to get full exclusion from capital gains tax? We don’t own any other primary residence; we are renting a home nearby.
The total depreciation deducted over the 3 years 5 months is $ 28,887. I understand we are liable for depreciation recapture when we sell. Is that a flat 25% or based on our tax bracket?
We are aware of the 1031 exchange and do not want to do an exchange currently.
Thank you!