Trump Officials Float a Bigger Capital Gains Exclusion for Home Sellers
The tax exemption on home sale profits hasn’t changed since 1997, even as home prices have roughly tripled. That widening gap is now fueling a debate in Washington over how much homeowners should be able to keep when they sell.
What the current rules actually allow
Under existing federal law, a single homeowner can exclude up to $250K of profit from a primary home sale. Married couples filing jointly can exclude up to $500K.
To qualify, you generally must have owned and lived in the home as your primary residence for at least two of the five years before the sale. The taxable number is your gain, not your sale price.
If you bought a home for $300K, added $50K in qualifying improvements, and sold for $700K with $40K in selling costs, your gain works out to roughly $310K. After the $250K single-filer exclusion, about $60K remains subject to federal tax.
Profits above the threshold face long-term capital gains rates of 0%, 15%, or 20%, depending on your income.
Capital improvements and selling expenses reduce your taxable gain. Routine repairs and maintenance generally don't count the same way, so keeping records matters.
Who the current cap is squeezing
Roughly one in three homeowners has built up more equity than the $250K single-filer exclusion, according to a 2025 NAR analysis.
That share could grow to 56% of all homeowners by 2030. The problem concentrates among longtime owners in expensive markets: people who bought decades ago and watched prices climb without any adjustment to the exclusion.
In 2022, roughly 10% of homeowner households had gains above the current limits, per data from The Budget Lab at Yale.
Those households had an average net worth of about $5.7M. That figure is why critics argue the biggest benefits from any expansion would flow to wealthier sellers.
Supporters counter that the limit simply hasn't kept pace with inflation and that raising it is catching up to reality, not handing out a new break.
What's being proposed and where it stands
National Economic Council Director Kevin Hassett recently signaled that the White House is considering a larger exclusion for primary home sellers.
No final policy has been announced, and the White House has said any formal proposal would come directly from the administration.
Several bills already in Congress show the range of options. The bipartisan More Homes on the Market Act would double the exclusions to $500K for single filers and $1M for married couples, then index both figures to inflation going forward. That bill has drawn roughly 170 co-sponsors.
A separate proposal, the No Tax on Home Sales Act, would eliminate the dollar cap entirely. A congressional analysis estimated the doubling proposal alone could reduce federal tax revenue by $46.4B.
Tax professionals who follow the issue describe any changes before the midterms as unlikely, given how difficult recent legislation has been to move through Congress.
Until something passes, the 1997 rules remain in place. Your adjusted basis, which includes your original purchase price, qualifying improvements, and selling costs, determines your actual taxable gain.
A free home sale tax calculator can help you estimate that number before you list, and a tax professional can confirm whether any of your gain would actually be taxable after the exclusion.