You do need to see an expert.
Seems like you are confusing the exemption allowed on selling your primary residence and avoiding capital gains taxes with depreciation on rental property.
It's confusing and best explained by a pro accountant who specializes in real estate.
Here, as I understand it, is where you're having a problem.
If the home was your primary residence for 3 of last 5 years, you can take the 250K exemption on capital gains tax when you sell it (500K if you're married). You can take this exemption even if you have rented it for 2 of those years (even the last 2 years). When you converted the home from your primary residence to a rental, you had to establish a "basis" (value) of the house for depreciation purposes. Whatever that value (house only, not land), you depreciate that on the 27.5 year schedule.
When you sell in this situation, you have to "recapture" the depreciated amount. This makes the profit larger on the deal. If your NET profit from selling (sale price less expenses of sale less your acquisition costs and other allowable expenses) is below the 250K (or 500K) amount, no capital gains tax is due providing you meet all other requirements.
The whole thing here is to get your expenses of acquisition, repair, sale costs, etc. to be as high as possible so your profit is as small as possible.
Now with today's market, these large (250 or 500K exemptions) will probably mean that most of us will not pay capital gains taxes in this situation.
If you have a very nice (expensive) place in a very expensive area, maybe that won't apply.
Anyway, it's best to talk to a real expert because there's still a lot of things I didn't cover, like component depreciation, etc.
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