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America’s homeowners are sitting on a staggering $34.7 trillion in equity, built up during a decade of rising home prices and historically low interest rates. For many, that wealth has become a reassuring cushion of cash to access when needed.
But now, as more homeowners look to tap that equity—whether to fund retirement, help family, or downsize in a high-cost market—they’re running into an unexpected obstacle: the tax code.
Selling can trigger steep capital gains taxes, due to exclusion limits that haven’t changed since 1997. Holding on to a home often means absorbing rising property taxes, especially in high-rate areas. And even passing a home down to children or grandchildren can come with gift, estate, or transfer tax liabilities.
Together, these outdated and overlapping rules are becoming a growing financial burden that’s hitting not just the rich, but also ordinary, longtime homeowners who never expected their home would become a tax liability.
In response, lawmakers have passed a wave of reforms and are pushing others aimed at modernizing the system—from raising the SALT deduction cap to locking in higher gift tax exemptions, and even proposing an end to capital gains taxes on primary home sales. Here’s a breakdown of where those efforts stand.
Pending: An end to the hidden home equity tax
Today, nearly 1 in 3 homeowners is subject to a hidden home equity tax because they’ve built up more equity in their home than the federal capital gains exclusion protects for single filers, according to a recent analysis by the National Association of Realtors®. By 2030, that share is projected to grow to more than half of all homeowners.
That means more ordinary sellers are being hit with tax bills originally meant for only the wealthy.
The culprit is a policy that hasn’t been updated since 1997, when the capital gains exclusion was set at $250,000 for individuals and $500,000 for married couples. Had the thresholds kept pace with inflation, they’d be more than double their current amounts: roughly $660,000 and $1.32 million today, according to research from the University of Illinois Chicago.
As more homeowners decry these outdated laws, lawmakers have taken notice. U.S. Rep. Marjorie Taylor Greene (R-Georgia) recently introduced the No Tax on Home Sales Act, which would eliminate capital gains taxes on the sale of a primary residence. The bill is aimed at everyday homeowners and would not apply to investors or flippers.
“This is a great gift for the American people,” Greene told Realtor.com® in an exclusive interview. She also framed the bill as a way to revive a sluggish housing market by freeing up locked-in inventory, and offer relief to seniors who are disproportionately affected by the home equity tax.
“Homeowners who have lived in their homes for decades, especially seniors in places where values have surged, shouldn’t be forced to stay put because of an IRS penalty,” she shared via a press release. “My bill unlocks that equity, helps fix the housing shortage, and supports long-term financial security for American families.”
There’s considerable momentum behind the bill. President Donald Trump has signaled he’s on board with the proposal, saying, “We are thinking about no tax on capital gains on houses.”
Advocacy groups have also applauded the measure.
“This is not about speculation, it’s about fairness,” NAR Executive Vice President and Chief Advocacy Officer Shannon McGahn says. “A homeowner shouldn’t be taxed like an investor. This is about protecting equity and helping the entire market function more efficiently.”
The bill has not yet been voted on, but support continues to grow.
Passed: A new SALT cap—and what it means for property tax relief
As home values soared over the past decade, property tax bills rose in tandem, especially in high-tax states. But since 2017, a federal cap on state and local tax (SALT) deductions has limited how much relief homeowners could claim on their federal returns.
The $10,000 cap, introduced under the Tax Cuts and Jobs Act, applied to the combined total of property, income, and sales taxes, disproportionately affecting homeowners in states such as New York, New Jersey, California, and Illinois.
Now, that’s changing. Starting in the 2025 tax year, the new One Big Beautiful Bill Act (OBBBA), signed into law by Trump, raises the SALT deduction cap to $40,000. It’s the first major revision since the original cap took effect—and one that could meaningfully lower federal tax bills for millions of homeowners.
When the $10,000 cap was introduced, property tax bills that exceeded it were relatively rare. But that’s no longer the case. In New Jersey and New York, more than a quarter of households now pay over $10,000 in property taxes alone, meaning they’ve had zero federal tax relief for other state and local taxes in recent years.
With the new $40,000 cap in place, that burden is expected to shrink dramatically. No state is projected to have more than 2% of homeowners above the limit, according to data from Realtor.com, restoring a key deduction for households that have seen their taxes skyrocket.
Passed: Higher gift tax exemptions
Under previous law, the lifetime estate, gift, and generation-skipping transfer tax exemptions were set to drop sharply in 2026—from over $13 million down to roughly $7 million—as provisions from the 2017 Tax Cuts and Jobs Act expired.
But the OBBBA has now made those higher thresholds permanent, offering families more room to transfer wealth, including real estate, without triggering a major tax hit.
Under the new law, individuals can gift up to $19,000 per year per recipient without any reporting requirements. Gifts above that amount require IRS Form 709, but no taxes are owed unless the total gifts exceed the lifetime exemption of $13.99 million.
These changes apply to both lifetime gifts and inheritances, making it easier to transfer high-value homes and assets across generations.
While the new rules offer flexibility, experts caution that gift, estate, and transfer tax rules are still complex, and families should consult a tax adviser—especially when real estate is involved. Still, for homeowners who don’t want to sell but hope to pass property on to the next generation, this expanded exemption offers a powerful new planning tool.
Is 2025 a turning point for homeowners trapped by policy?
For generations, homeownership has been embraced as the cornerstone of long-term financial security: a way to build wealth, plan for retirement, and pass something meaningful to the next generation.
But the concentration of real estate wealth in the past decade has introduced a slew of problems for everyday homeowners. And while recent reforms to property, gift, and estate tax rules offer signs that lawmakers are beginning to take these pressures seriously, the biggest barrier—home equity tax—remains firmly in place.
Today, the tax affects nearly 30 million homeowners who exceed the exclusion limit for single filers. Within a decade, that number is expected to double, to nearly 59 million.
It’s arguably the greatest threat to homeowners’ wealth today. While Greene’s No Tax on Home Sales Act is gaining traction, the question is no longer just whether relief is coming, but whether it will come soon enough to matter for the millions of families already caught in the gap between policy and reality.