Primary Residence and Rental property
A Two Family Home can be treated as one or two seperate properties
If you live in your primary residence three out of 5 years before you decide to sale the property, it can qualify you for a exclusion up to 500,000 dollars on your sale or 250,000 dollars if you are a single party. If the rental use was longer then 3 years, then any gain related to the sale of the property will be taxable and won't qualify for the sale exclusion.
Depreciation on the rental portion after May 6, 1997 is subject to what they call recapture. This means the tax rate will be at 25%. The balance of the gain is at 15% rate.
Even if the rental use during the 5 years does not exceed three years any gain related to rental use after 2008 won't qualify for the sale exclusion
This information was search out and information found was part of questions and answers by Barbara Wiltman, at Jk Lasser Institute
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