Home Sale Exclusion After Renting It Out: which years count against the exclusion
2026 law · reviewed September 6, 2026
| Situation | Effect on the exclusion | Tax |
|---|---|---|
| Rented BEFORE moving in (after 2008) | That share of the gain is not excludable | Long-term gain rate, 15% or 20% |
| Rented AFTER moving out, within the five-year window | No effect | Excluded with the rest |
| Rented more than three years after moving out | Fails the two-of-five test entirely | All gain taxed |
| Depreciation taken while rented | Never excludable | Up to 25% |
| Gain within the exclusion after the above | Excluded up to $250,000 ($500,000 joint) | 0% |
How periods of rental affect the home-sale exclusion and how each part of the gain is taxed (§ 121(a), (b)(5), (d)(6); § 1(h)(6)).
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