Selling rental home (used to be primary home), any tax considerations?

[siggy_freud]

Hey all,

I have listed my first home for sale. I bought it in 2011, and it was my primary residence until 2013, when we bought a new primary residence, and turned the first home into a rental.

My understanding is that because it was a primary residence in 2 of the last 5 years I'm not subject to capital gains tax on it.

I bought it for 100k, owe 92k on it currently, and just accepted an offer for 220k (market went up, and I renovated the place over the years).

By my estimates after fees I should clear about 112-114k, but are there any other tax considerations I should be making?

My plan is to use it to:

1. Pay off remaining student loans (28k),
2. Home improvements (10-20k still deciding scope),
3. Finish my long-term truck restoration (20k), which will allow me to sell my car and not have a car payment.
4. Help buy my wife a new (to her) car as hers is being bought back by VW (12-14k)
5. Add the rest to our rainy-day fund (currently sitting at 10k).

Should reduce our debt by about 1,200 a month, and get our rainy day fund up to 30k or so. Our current primary is on a 15-year. Currently owe about 228k, and it's worth about 375k, but no plans to move in the near future as we like the area, and everything else just keeps going up in price as well.

For entertainment, here is a before/after of the living room/kitchen area :

[creditcardfree]

You are correct on the tax rule 2 out of the last five years it must have been your primary home in order to avoid capital gains o f$500K or less if married. I think you are probably good. I haven't need to use the rule myself, so I don't know if there are things to be concerned with.

[GoodSteward]

Sounds like a great win, I hope this works out.

[LivingAlmostLarge]

Sounds like a good plan. Why are you selling now?

[siggy_freud]

A few reasons.

1. The market is high, and I don't think this particular type of home will go much higher. It's a 1 bedroom single family, so it's kind of a niche offering. Competes with apartments in size, but homes in price. It's really nice inside, but i think a 700sqft home is only ever going to go so high. It's not like it's in a major city.

2. I don't really want to be a landlord anymore.

3. If I don't sell now, I'll be subject to property gains tax. So selling this year vs next saves me about 25-30k.