In a move that could significantly change how homeowners sell their properties, former President Donald Trump has endorsed a legislative proposal to eliminate federal capital gains taxes on profits from the sale of primary residences. The idea is gaining traction in 2025 as more Americans find themselves exceeding outdated tax exclusion thresholds due to rising home prices.
The proposal would fully remove the current tax limits and rules that have been in place since 1997, when home values and housing market conditions were vastly different. Backers of the bill argue that the current system penalizes long-term homeowners who have seen their property values rise significantly over the years.
Table of Contents
Current Tax Rule and What Could Change
Under existing law, 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. However, to qualify, the seller must have lived in the home for at least two of the last five years. Gains beyond those limits are taxed at federal capital gains rates of 15 to 20 percent, depending on income.
The proposed legislation, known as the No Tax on Home Sales Act, would eliminate the tax entirely on any gain from the sale of a primary home. The proposal also removes the requirement for homeowners to live in the property for two years. If passed, no homeowner would pay federal capital gains tax on profits from selling their main residence, regardless of how long they owned it or how much profit they made.
| Rule | Current Law | Proposed Change |
|---|---|---|
| Exclusion for Single Filers | Up to $250,000 | No limit |
| Exclusion for Joint Filers | Up to $500,000 | No limit |
| Residency Requirement | 2 years of last 5 years | None |
| Tax Rate on Excess Gains | 15% to 20% | 0% |
| Inflation Adjustment | None | Not applicable |
More Americans Now Hit by Tax Thresholds
Due to steady home price increases, a growing number of homeowners are now exceeding the tax-free thresholds. Data from the National Association of REALTORS® (NAR) shows that as of 2025, about 34 percent of individual homeowners and 10 percent of married couples would owe capital gains taxes after selling their primary homes.
NAR also estimates that around 29 million homes are affected by the individual cap, and nearly 8 million households exceed the joint filer cap. These figures highlight how the original 1997 policy no longer reflects today’s market, where average home prices have grown by over 200 percent in some regions.
Who Benefits Most from the Proposed Change
The primary beneficiaries of this policy would be long-term homeowners in high-cost markets such as California, New York, and Massachusetts. Seniors and retirees, in particular, would gain financial freedom to sell and move without facing major tax bills. Many older homeowners have delayed downsizing due to the taxes they would owe on decades of home appreciation.
Frequent movers, such as military families and workers with job-related relocations, would also benefit from the proposal’s removal of the time-of-residency requirement. Currently, those who sell their homes too quickly are disqualified from the exclusion, even if they used the property as their primary residence.
| Example Scenario | Taxable Gain Now | Tax at 20% | Tax Under Proposal |
|---|---|---|---|
| Single filer, $350,000 gain | $100,000 | $20,000 | $0 |
| Married, $600,000 gain | $100,000 | $20,000 | $0 |
| Married, $300,000 gain | $0 | $0 | $0 |
Policy Debate and Financial Concerns
Supporters say the bill would increase housing turnover by allowing owners to cash out without penalty. However, critics warn that removing the tax could lead to large federal revenue losses. Indexing the exclusion to inflation alone would cost the government an estimated $18.7 billion over ten years. Eliminating the tax entirely could cost much more.
There are also fears of misuse. Some investors might falsely claim rental or vacation properties as primary homes to avoid taxes. Economists also worry that this policy could lead to more demand in already expensive markets, putting further pressure on housing affordability.
Next Steps in Congress
The bill is in its early stages but has drawn national attention. While it aligns with Trump’s broader tax reduction agenda, it will face scrutiny over fairness and budget impact. Lawmakers may consider alternatives, such as raising or indexing the current thresholds instead of removing the tax entirely.
Congressional debate is expected to focus on how the measure affects market stability, homeowner equity, and federal finances. The outcome could impact millions of Americans planning to sell their homes in the coming years.