In July 2025, former President Donald Trump proposed a bold idea to help reinvigorate the U.S. housing market: eliminating the capital gains tax on home sales. The announcement came amid growing conversations in Congress, particularly around a bill introduced by Rep. Marjorie Taylor Greene titled the “No Tax on Home Sales Act.” While Trump acknowledged that lowering interest rates might ultimately be more impactful for home affordability, the capital gains tax cut could encourage more Americans to sell their homes and free up much-needed housing inventory.
Current Capital Gains Tax Exemption
As it stands, homeowners can exclude up to $250,000 in capital gains from the sale of a primary residence if they are single, or up to $500,000 if married and filing jointly, provided they meet ownership and residency requirements. These thresholds were set in 1997 and have not been adjusted for inflation.
Since that time, home values have more than doubled in many U.S. markets, particularly along the coasts and in urban areas. That means many long-term homeowners may now face a sizable tax bill when they sell, especially retirees and older Americans who bought decades ago and saw their property appreciate significantly.
Why This Policy Is Being Considered
A growing number of economists, lawmakers, and homeowners believe that the current exclusion limits are outdated. The lack of adjustment for inflation means many long-time homeowners now exceed the exemption threshold, forcing them to pay taxes on gains that are largely due to economic trends and market appreciation rather than investment choices.
This situation has led to what’s often called the “lock-in effect.” Homeowners are disincentivized to sell because doing so could trigger a hefty capital gains tax, even if they’re hoping to downsize or relocate. Removing this tax, or increasing the exemption threshold, might ease that burden, encouraging more mobility in the housing market.
Potential Benefits
1. Increased Housing Supply
The U.S. is currently facing a housing inventory shortage. Many homeowners who might otherwise consider selling stay put to avoid tax penalties. Removing the capital gains tax on home sales could unlock inventory, helping first-time buyers and families move into homes that better fit their needs.
2. Helping Older Homeowners
Older Americans who are “house rich” but cash poor may be reluctant to sell because of the tax consequences. Eliminating this burden would give them more flexibility to downsize, move closer to family, or shift into retirement communities without taking a financial hit.
3. Boosting Economic Activity
By encouraging more real estate transactions, the policy could boost other areas of the economy, such as construction, moving services, home improvement, and real estate-related jobs.
Criticism and Concerns
Despite the appeal to many homeowners, not everyone is convinced this proposal is a good idea.
1. Benefit Skews Toward the Wealthy
Critics argue that eliminating the tax would primarily benefit wealthier individuals with high-value homes who are more likely to exceed the current $250,000/$500,000 limits. This could exacerbate income inequality and leave lower- and middle-income homeowners with little to gain.
2. Loss of Government Revenue
Capital gains taxes are a significant source of federal income. Eliminating them on home sales could result in billions of dollars in lost revenue. This may require cuts to public services or increases in other taxes to compensate.
3. Minimal Impact on Affordability
While eliminating the tax might increase housing supply, it does little to address the broader affordability crisis. Home prices are still historically high, and many prospective buyers remain locked out of the market due to rising interest rates, student debt, and wage stagnation.
4. Potential for Price Inflation
There is concern that an influx of home sales might drive up prices in certain markets, especially if investor activity spikes. Without adequate controls or support for first-time buyers, the plan could backfire.
Who Stands to Benefit
The biggest winners from such a change would likely be long-time homeowners in states with high property values, such as California, New York, and Massachusetts. Many of these individuals bought their homes decades ago and would now exceed the exemption limit by hundreds of thousands of dollars.
Retirees looking to sell and move into smaller homes or different states would also gain more flexibility. Without the fear of a tax penalty, they might feel more confident putting their homes on the market, freeing up inventory for younger families.
Legislative Outlook
The idea still has a long road ahead before becoming law. While Trump has voiced support for the policy, it would require approval from Congress. Given the current political climate, it’s unclear whether such a proposal would gain bipartisan support.
Some members of Congress may instead push for a middle-ground approach, such as adjusting the exemption thresholds for inflation rather than eliminating the tax entirely. That could provide relief for many homeowners while avoiding a complete loss of tax revenue.
Broader Housing Policy Context
This proposal comes at a time when the housing market is experiencing unusual pressure. High mortgage rates have sidelined many potential buyers, and rising home prices have made ownership increasingly difficult for younger generations. Inventory remains low, especially for entry-level homes.
Trump’s suggestion of removing the capital gains tax is one approach to boosting market activity. However, experts point out that interest rates, zoning reforms, and affordable housing initiatives will likely play a bigger role in solving the housing crisis.
Final Thoughts
Donald Trump’s proposal to eliminate capital gains taxes on home sales has sparked a heated debate about housing policy, wealth equity, and tax reform. On the one hand, it could give homeowners, especially long-time owners and retirees, greater freedom to sell without tax consequences, potentially adding inventory to a tight housing market.
On the other hand, the policy risks skewing benefits toward the wealthy and could result in significant revenue losses for the federal government. Whether or not the idea gains traction in Congress, it has added a new dimension to the national conversation around housing affordability and mobility.
As the 2024 presidential election cycle heats up, expect to hear more about housing policy proposals from all candidates. In a market defined by high prices, limited options, and economic uncertainty, any plan that promises relief is sure to get attention, especially when it comes from a high-profile figure like Donald Trump.
