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My understanding is that the house on which you get the exclusion must be your prinmary residence. If you are renting it to someone else, it is no longer your primary residence, so you will not qualify for the exclusion.

Not exactly. The house on which you get the exclusion must be your primary residence for two years during the previous five years. (It doesn't have to be your primary residence at the time you sell it--you could have been renting it out at that point.)

From the FAQ for this board:

Like virtually all other tax laws, there are some restrictions. This exclusion has a detailed set of rules that must be followed to qualify for the exclusion. Besides the $250,000/$500,000 dollar limitation noted above, the seller must have owned and used the home as his or her principal residence for at least two years out of the five years before the sale. And, while the two years don't have to be consecutive, in most cases you can only take advantage of this gain exclusion provision once during a two-year period.

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