For example, former President Donald Trump has floated the idea of a policy that would eliminate capital gains taxes on home sales. This is a crucially important proposal to help reinforce the housing market. It is intended to provide tax relief to homeowners, particularly long-time owner-occupants. Yet, the plan leaves many questions about the fiscal impacts and the share of support it could expect in Congress.
Under current tax law, homeowners only have to pay capital gains taxes on their profits if they exceed $250,000 for single filers. For joint filers, it increases to $500,000. These thresholds, set in 1997, have not been changed to reflect changes in the cost of living. Home values have skyrocketed, almost doubling between 1997-2021. Because of this, many often unaware homeowners are blindsided with unintended capital gains taxes when they sell their inherited or gifted homes. Nearly a third — about 29 million — relevant homeowners, or 34% of all homeowners, would end up above the $250,000 cap. In addition, over 8 million owner-occupied homes or 10% could exceed the $500,000 cap.
Trump’s plan would completely get rid of capital gains taxes on primary home sales. We think this is a really great change for longtime homeowners who’ve seen a major jump in their home equity. Homeowners in states such as Washington, California, Utah and Massachusetts would be greatly affected. They frequently push over the capital gains thresholds due to high housing costs in these areas.
As of this writing in early 2025, the median home sales price has increased by almost 190%. It skyrocketed from roughly $145,000 in 1997 to nearly $417,000 today. Given this dramatic increase in home values, it’s easy to see how capital gains taxes are a major new burden on sellers.
In discussing the potential policy shift, Trump remarked, “We are thinking about no tax on capital gains on houses,” indicating his administration’s commitment to exploring this option further. He elaborated on the broader financial context, suggesting that a reduction in interest rates by the Federal Reserve could alleviate the need for such tax reforms: “If the Fed would lower the [interest] rates, we wouldn’t even have to do that.”
The proposal slots seamlessly into Trump’s overall legislative agenda, referred to as the “big beautiful bill.” It addresses the challenges of housing supply, pandemic shocks, and climate change while raising the financial stability of American families. To make this homebuyer-boosting initiative official in Congress, Representative Marjorie Taylor Greene has introduced the No Tax on Home Sales Act.
The fiscal costs of this proposal, both nationally and at the state level, are enormous and alarm many economists and advocates alike. Eliminating capital gains taxes on home sales would be very expensive to federal revenues. The proposal’s fate depends on whether it can garner sufficient support from lawmakers across party lines, a task that may prove challenging given differing views on tax policy and fiscal responsibility.