Home Free? » From: New Orleans, LA Dear TaxMama, What an interesting name for a website. I love it. Anyway, I have a second house that I used to live in that I have been renting for the past 8 years. I have filled out the appropriate Schedule C (?) each year claiming my rental income, depreciation expense and other expenses. I am interested in selling and wondering what would be the best way to save myself a few bucks as far as capital gains taxes, etc. First, do I qualify for the one time exclusion since this will probably be the only house I sell? Secondly, how do I calculate my gain since I have taken depreciation. I expect the house to sell for about $50,000 more than what I paid for it. Also, how do I figure out my basis to calculate the gain. The house has been vacant for about 6 months. Should I list it as a secondary residence for capital gains exclusion purposes? Feel free to answer any or all of the questions or maybe point me in the right direction for reference. Thanks for your help. Patricia Hi Patricia, Thank you for the compliments. Always a pleasure. Hopefully, during the past few years, you have been using Schedule E (not C) to report the rental income. Unfortunately, since you've not lived in the house for so long, the personal residence exclusion won't apply to you. Of course, if you move back in for two years, then, sell it - you could have all the profits tax free. There is a matter of the depreciation you have taken for all the years that it was a rental. Unfortunately, since the law keeps changing on this matter, it would be necessary to research how to handle the taxability of those deductions if you convert the house back to your home in the year that you do sell it. Right now, if you sell it, your gain is higher than you realize. It works like this - Example Start with the purchase price of the house $100,000 Cost of land (if not included above) 25,000 Cost of improvements, remodeling 10,000 Costs of loans and refinancing 3,000 ------------- Subtotal $138,000   Then, deduct the amount of depreciation taken over the years on: House ($29,000) Improvements (10,000) Loan (800)   Net Tax Cost (basis) $98,200 If you are selling it for $50,000 more than you paid for it , let's say $175,000 Less commissions/selling costs (15,000) ------------- Your taxable profit would be: $61,000 Of that, $39,000 might be ordinary gain - taxed at your highest tax rate. and only $22,800 would be at capital gain rates. So, there you have it. More than you ever wanted to know. Ready to move back into the house for two years? Best wishes Eva Rosenberg Your TaxMama