Wondering if anyone has experienced capital gains tax on selling their rental property and can give me some pointers or pitfalls to avoid. I own a triplex that has appreciated about $300k in the 8 years I've owned it. When I purchased it it was my primary residence. I moved out 3 years ago. Then I refinanced out of the ARM to lock in the low interest rates we're experiencing, but unfortunately I had to refi as an investment property because I bought another primary residence in the meantime.
When I bought the place I did do significant improvements, but didn't cost a lot because my husband and I did all the labor. We built a wall to make the duplex into the triplex it is now. We also did a lot of buff and puff work like paint, new tile, base boards, but I've read that this may be considered maintenance, not improvements.
Now we are considering selling the triplex within the next 5 years to realize the appreciation. Currently, we mostly hold real estate investments and I'd like to diversify.
1. I've read that if I have lived in the property 2 out of the last 5 years of ownership I can avoid capital gains. Should I sell right away considering I did live in the house until 2013?
2. I'm confused about claiming depreciation. How is this factored into the taxes?
3. How do I deduct improvements that are hard to count because they were my own labor and happened 8 years ago?
Sincere thanks to anyone that has pointers.