US Congress Considers Doubling Home Sale Tax Break

Legislation gaining bipartisan traction in the U.S. Congress proposes to double the amount of capital gains homeowners can exclude from taxes when selling their primary residence. The "More Homes on the Market Act" aims to encourage long-time homeowners to sell, thereby increasing housing inventory and potentially easing affordability issues.

The bills, with near-identical language in the House and Senate, would raise the exclusion limit from $250,000 to $500,000 for single filers and from $500,000 to $1 million for married couples filing jointly. Lawmakers hope this change will incentivize homeowners to sell properties they've held for years, addressing a tax code provision that has remained unchanged since 1997, a period during which home prices have roughly tripled.

Proponents, including the National Association of Realtors (NAR), argue that the current tax exclusion is outdated and prevents needed market activity. According to NAR analysis, roughly one-third of homeowners have accumulated more equity than the current exclusion allows, a figure projected to rise to 56% by 2030. Doubling the exclusion could free up existing housing stock for potential buyers, particularly first-time homebuyers, without requiring new construction.

The push for the legislation comes amid growing concerns over housing affordability nationwide. The bipartisan support for the "More Homes on the Market Act" highlights a shared recognition among lawmakers of the need to stimulate housing supply. While the bills are still progressing through the legislative process, their momentum indicates a significant consideration of tax policy changes to impact the housing market.