If you’ve owned your home for several years, there’s a good chance the value of your property has increased over that period (especially in a high-demand area). Selling a home with a large capital gain can eat into years of equity by way of taxes to the IRS, which is why some homeowners choose to stay in the same home indefinitely. However, a new bill has been introduced in Congress that could change that in a big way.
The “Current” Law from 1997
Current IRS rules state that if you sell your primary residence, you can exclude up to $250,000 in capital gains if you’re filing single and up to $500,000 if you’re married filing jointly.
To qualify, you must have lived in the home for two of the last five years. The IRS calls this a section 121 exclusion. It means you have to have owned the home for at least two years (730 days) and lived in that home as your primary residence for at least two years (730 days) of the last five years.
These thresholds were set in place in 1997 by the Taxpayer Relief Act of 1997 and have remained unchanged since. Inflation hasn’t been taken into consideration, and the reality is that home prices have more than tripled in some markets. The issue is that more homeowners are crossing the exclusion line, especially in high-cost states like New York and California.
The Proposed Change: Doubling the Exclusion or Eliminating Capital Gains on Home Sales Entirely
There are two bills currently introduced in the House of Representatives:
H.R. 1340 – More Homes on the Market Act. H.R. 1340 was introduced on February 12, 2025, by Rep. Jimmy Panetta (H.R.-CA-19). This bill is the reintroduction of H.R. 1321, which died with the end of the 118th Congress. This bill carries similar rules to the current capital gains exclusion, with two big changes:
First, it aims to double the current exclusion to $500,000 for individuals filing single and $1,000,000 for people married filing jointly. Secondly, the exclusion would adjust to inflation starting from the year 2024 based on a specific cost-of-living formula.
The goal of H.R. 1340 is to incentivize homeowners to sell their homes, which would in turn increase the housing supply and possibly alleviate inflated housing prices.
H.R. 4327 - No Tax on Homes Act (To amend the Internal Revenue Code of 1986 to eliminate the dollar limitations on the exclusion of gain from sales of principal residences, and for other purposes) H.R. 4327 was introduced on July 10, 2025 by Rep. Marjorie Taylor Greene (R-GA-14). The main component of this bill is that it would eliminate the capital gains exclusion. This would be great, however, I don’t think this will make it very far down the road to being signed into July 10, 2025, by Rep. Marjorie Taylor Greene (R-GA-14) law. It would seem to have been created more so as a media attention grabber.
Here’s a Real-World Example of H.R. 1340 – More Homes on the Market Act
Let’s say you’re a married couple who bought your home in 1998 for $300,000 and now you’re selling it for $1.2 million—your capital gain: $900,000.
Under current law, $500,000 is tax-free, but the remaining $400,000 is taxable. Under the new proposal, the full $900,000 could be tax-free. Depending on your income bracket, that could mean saving tens of thousands of dollars in taxes.
Why Now? What’s Next? What Can You Do?
While the No Tax on Homes Act is a political stunt, the More Homes on the Market Act may have some traction. H.R. 1340 is intended to unlock more housing inventory, especially from retirees or long-time homeowners who are hesitant to sell due to tax consequences. The passing of H.R. 1340 could help ease the currently tight housing supply, giving sellers more flexibility to move, downsize, or relocate.
If you’ve ever seen Schoolhouse Rock “I’m Just a Bill,” you would know that the proposed legislation needs to make it out of committee and pass through both houses of Congress and then be signed into law by the President. Although the More Homes on the Market Act from the 118th Congress failed, this one may be gaining some bipartisan traction.
What you can do now is track the bill’s progress if you plan to sell your home. Talk to a financial advisor or tax professional about capital gains on real estate and how it may affect you. If you do plan to sell soon, it may be worth waiting to see what happens to these bills.
No Tax on Homes? New Bill Could Exempt More of Your Profit from Taxes
October 13, 2025
Whitaker Myers
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