Debates around possible new federal tax reforms have been fired up for some time now. This means that recent proposals like former President Donald Trump’s capital gains tax exemption for home sales call on homeowners to help mitigate their expected tax liabilities. Catherine Valega, a certified financial planner from the Boston area, explains that home sellers often overlook strategies to minimize their capital gains. One of the best ways to do this is by changing their “cost basis,” which is how much someone originally paid for a home.
Currently under U.S. tax law, capital gains taxes only apply when you sell your primary residence at a profit of more than $250,000 as a single filer. For married couples filing jointly, the threshold is 500,000. Valega recommends keeping a thorough history of capital improvements, as this can be a huge help in reducing taxable gains at the time of sale.
“The improvements are necessary to keep your home in good condition and can improve the resale value of your home,” Valega noted. She urges sellers to keep careful records of all improvements made during their period of ownership in order to prove an increase in cost basis.
Experts are warned that the average homeowner doesn’t exceed these profit cut-offs. This result can help alleviate short-term concerns about capital gains tax revenue. Recent 2025 analysis from the National Association of Realtors finds that as many as 34% of homeowners might be above the current $250,000 limit for single filers. At the same time, as many as 10% will exceed the $500,000 limit for married couples. Those who do exceed these thresholds face capital gains tax rates of 0%, 15%, or 20%, depending on their taxable income.
In addition, some higher earners pay an additional 3.8% surcharge known as the net investment income tax. This tax only kicks in for profit from home sales over specific defined amounts. William McBride, chief economist at the Tax Foundation, notes that those most affected by capital gains taxes on home sales tend to be “older homeowners, people who have been in their house for many, many years.”
Donald Trump’s recent plan offers a good starting point for such a proposal, including repealing taxation on capital gains at death. He even broached the idea of doing away with all capital gains taxes on home sales in a private Oval Office meeting. Property owners should start now to proactively avoid tax surprises by being prepared for the implications of such a change.
Valega’s suggestions are excellent advice for any homeowner with an eye towards getting their property ready to sell. Maintaining detailed documentation of upgrades creates a greater cost basis. Making this preparation will help sellers be equipped to face any and all potential tax liabilities so they can keep moving forward.
“We’re thinking about that.” – Donald Trump
The National Association of Realtors has long advocated for reforms related to capital gains taxes on home sales, underscoring the need for a more equitable system that considers the evolving real estate landscape and the financial realities facing many homeowners today.