I have a home and want to purchase another. I will be moving to this new home and living here, leaving the first and renting it out.

If I choose to sell the rental in 7 years, then I know I am subject to the long term capital gains tax as well as the depreciation recapture tax.

If the home depreciates $7000/yr then it would be $49,000 in depreciation.

If I purchased the home for 300K, of which $200,000 was the home and 100K was the land, then it would be $200,000-$49,000 (lets approx to $50,000 to make it more simple). So the home is now worth $150,000 and thus, it would be like I purchased it for $150,000 + $100,000= $250,000. So if I sell this home for $550,000, then it would be a profit of $300,000.

Of the $300,000, I would subtract the $50,000 and this $50,000 would be taxed at 25%

Then the $250,000 would be taxed at my income tax rate...say 30%.

Is the above calculation correct?

Also, what if I choose to return to my rental property, live for 2 years, and then sell it. Can I use the $500,000 exemption rule then?

Thanks in advance!