Capital Gains on Real Estate

[priceright]

in colorado. bought new house 18 mos ago $235,000, mortgage $100,000. have been renting out old house, value $155,000, mortgage $180,000, monthly income $500. have taken depreciation on old house on federal tax. is there a time limit to sell old house to avoid capital gains tax? If deadline has passed or I decide to hold on to the old house a few years is there a way to avoid capital gains down the road? are there any one time exemptions?
thanks.

 

[loku]

Home exclusion after rental of property

If you owned the old house and it was your main residence for a period longer than 2 years, then you can exclude up to $250,000 ($500,000 if you are married) gain on the sale of the house if you sell it before the end of the five year period, starting two years before you moved out of the home. However, you may not exclude the part of the gain equal to the amount of depreciation you deducted while renting the property.

The following rules apply to you.
To exclude gain, you generally must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997.