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You can use up to 250K capital gains exclusion if you owned and used the property as your primary residence for at least 2 out of 5 years prior the sale. You can only apply the exclusion to one sale and only every two years. When did you converted the rental house from your primary residence to rental property?
Unfortunately you cannot avoid capital gains by reinvesting it into another property. This option had been replaced with the capital gains exclusion several years ago.
If you convert a property from personal to rental use, you have 3 years to sell the property and still qualify for the exclusion. How long have you been renting that house?
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