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Convert Home to Rental

Converting your home to a rental?

See how renting out a former residence affects your §121 home-sale exclusion — how much gain is still shielded, and exactly when the 3-year fuse runs out.

Your situation

Turned a home into a rental? Your §121 exclusion is on a clock. See how much gain it still shields — and when the window closes.

$
$
Is your §121 exclusion alive?
Gain shielded · illustrative
Your Landlord Guide
Est. 2026
The 3-year fuse
Still alive — about 24 months left.

You need to close within 36 months of moving out to keep the full exclusion. Past that it doesn’t vanish entirely — a reduced exclusion is available if the sale is mainly down to a job move, health, or something unforeseeable — but it is prorated, so the full amount is worth protecting.

Total gain on sale
Sale price − adjusted basis
$300,000
§121 exclusion cap
Married filing jointly
$500,000
Depreciation recapture
§1250 · never excludable
$40,000
Gain shielded by §121
Excluded from tax
$260,000
Gain that stays taxableAn estimate for discussion
$40,000
Two hard edges. Depreciation you took while renting is never excludable under §121 — it comes back as unrecaptured §1250 gain. And the fuse is unforgiving: sell within 3 years of moving out or the whole exclusion disappears.

Informational purposes only — estimates for discussion, not tax, legal, or financial advice. No professional-client relationship is created. Consult a qualified CPA about your situation.

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How this is calculated · sources

Every figure traces to a source

What this estimate assumes

  • Missing the 3-year window loses the FULL exclusion, but not necessarily all of it: where the sale is mainly due to a work move (a new job 50+ miles farther), health, or an unforeseeable event, a reduced exclusion is prorated over 24 months.
  • The reduced exclusion is prorated on the months you enter. The rule uses the smallest of your time living there, your time owning it, and the time since your last §121 sale — so if those differ, use the smallest.
  • Depreciation taken while rented is never excludable under §121.
  • This models the usual direction — you lived there, then rented it out, then sold. Buying as a rental first and moving in later prorates differently and isn't covered here.
  • The ownership test (24 of the last 60 months) and the bar on having excluded another home's gain in the prior 2 years aren't checked.