Home Sale Capital Gains Tax Exemption on the Horizon? Essential Information Explained
The No Tax on Home Sales Act, a bill introduced by Rep. Marjorie Taylor Greene, is currently under consideration and aims to change the way capital gains taxes are applied to the sale of primary residences. The proposed legislation seeks to remove the current capital gains tax exclusion limits, which have remained unchanged since 1997, despite the soaring home values in many areas.
If passed, the act would apply only to primary homes and not extend to second homes, investment properties, or house flipping transactions. This could potentially benefit a relatively small but affluent group of homeowners, particularly those in cities such as San Francisco, California; Austin, Texas; and Miami, Florida, where long-term residents often experience hundreds of thousands of dollars in property appreciation.
Homeowners in states with high capital gains tax rates, like California or New York, may still face substantial tax bills when they sell their primary residences. However, fully eliminating the capital gains tax could mean six-figure savings for people whose homes have risen far beyond the normal $250K/$500K exclusion limits.
Currently, eligible homeowners can take advantage of the home sale exclusion, up to $250,000 ($500,000 for married couples) in profit from selling your primary home can be excluded from federal capital gains tax if you meet the IRS rules. Rep. Greene argues that eliminating capital gains taxes could remove a key deterrent to selling, particularly for long-term and "senior" homeowners.
The bill has gained notable attention and is aligned with President Donald Trump's public statements indicating his administration is "thinking about" eliminating the tax on capital gains from houses. The proposal has found some bipartisan interest with related Democratic legislation aimed at increasing and indexing the exclusion amounts.
However, it is important to note that the bill remains a proposal and has not yet become law. Its actual legislative status remains pending, and its net impact on housing prices and market dynamics would depend on final provisions and implementation. Some economists warn that extra cash in sellers' hands might boost demand for other homes, potentially pushing prices up, while others suggest some homeowners might delay selling to maximize gains under the current thresholds, complicating impacts.
In summary, the No Tax on Home Sales Act is a proposed bill with the potential to significantly alter capital gains tax treatment for primary home sellers, aiming to alleviate housing supply constraints by reducing the tax penalty on selling homes. However, its actual legislative status remains pending, and its net impact on housing prices and market dynamics would depend on final provisions and implementation.
[1] CNN Money [2] The Washington Post [3] Forbes [4] House Ways and Means Committee [5] Congress.gov
- With the passage of the No Tax on Home Sales Act, primary homeowners would not have to pay capital gains taxes on their profits, specifically exempting real-estate investments, secondary homes, and house flipping transactions.
- The proposed legislation, which has garnered attention from CNN Money, The Washington Post, Forbes, and the House Ways and Means Committee, aims to encourage investing in real-estate by removing the capital gains tax, thereby potentially benefiting those who have experienced significant property appreciation in cities like San Francisco, Austin, and Miami.
