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The tax rule governing capital gains on home sales, which has remained unchanged since 1997, is causing a hidden home equity tax for millions of homeowners.
Approximately 1 in 3 sellers currently faces the risk of paying capital gains tax on their home equity, a number expected to rise to over half of homeowners by 2030.
The issue disproportionately affects retirees and longtime owners who may incur substantial tax bills due to “phantom gains” resulting from inflation.
FULL STORY: Homeowners Face Hidden Home Equity Tax: 3 Big Proposals Could Rewrite the Rules
Key takeaways
- U.S. Rep. Marjorie Taylor Greene has proposed the No Tax on Home Sales Act to eliminate capital gains taxes entirely for primary residence sales, an idea supported by President Donald Trump.
- The bipartisan More Homes on the Market Act seeks to double the exemption limits and index them for inflation, aiming to incentivize homeownership without significantly affecting the federal budget.
- Policy groups advocate for indexing gains to inflation to tax only real appreciation, addressing the issue of homeowners facing taxes on gains inflated by rising prices.
- The proposals aim to modernize the system that penalizes homeowners for not selling, potentially unlocking more housing inventory.
- Each proposal differs in terms of fairness, cost implications, and who stands to benefit, with considerations about the impact on housing market dynamics and revenue loss.
This summary has been generated with AI tools and edited by Realtor.com® News & Insights editors. The full story, written and edited by Realtor.com News & Insights newsroom journalists, is linked at the top of the summary.