I bought my first house in May 2012. I moved into my second (current) house in November 2014. After I moved out of my first house, I began doing repairs on it, and started renting it out around May of 2015. So I lived in my first house for about 2.5 years and have been renting it for about 1.5 years. The house has almost doubled in value. I bought it foreclosed for 70,000 and its worth around 130,000. I really want to stay in the rental property business for a while, but I know there is a law/rule/exemption for selling a house if you've lived in it for 2 out of the last 5 years, which I have. If you meet that requirement, you don't have to pay capital gains on the profit from the sale.
If I sold the house now I wouldn't have to pay capital gains, but I would then want to buy another house as a rental. Also, right now I don't even get to depreciate the full value of the house since i bought it at 70,000. So the question is, is there any way to keep my current rental and avoid paying capital gains if/when I sell it later in life and maybe also depreciate based off the home value instead of purchase price? Could I sell the house to myself or something? I don't know. Any idea what the best thing to do here is? I really don't want to sell the house, just to buy another, but it would save me around $9000 in capital gains. Am I missing something?