Former President Donald Trump has endorsed legislation to eliminate federal capital gains taxes on profits from the sale of primary residences in 2025. If passed, homeowners would no longer owe taxes on gains regardless of how much profit they make or how long they have owned the property. This proposal could significantly change the real estate market and tax policy.
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Current Tax Rule and Proposed Changes
Under current law, homeowners can exclude up to 250,000 dollars in capital gains for single filers and 500,000 dollars for joint filers, provided they have lived in the home for at least two of the last five years. Any gains above these limits are taxed at 15 to 20 percent depending on income. The proposed No Tax on Home Sales Act would remove all limits and residency requirements, allowing homeowners to keep the full profit from selling their primary residence.
Current vs Proposed Tax Rules
| 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 Are Now Affected
Due to rising home prices, a growing number of homeowners exceed the existing tax-free thresholds. According to the National Association of REALTORS, about 34 percent of individual homeowners and 10 percent of married couples would owe capital gains taxes on their primary homes in 2025. Approximately 29 million individual homes and 8 million joint households surpass the current exclusion limits, showing that the 1997 rules no longer reflect modern housing markets.
Who Benefits Most from the Proposed Change
The primary beneficiaries would be long-term homeowners in high-cost areas such as California, New York, and Massachusetts. Seniors and retirees would gain financial flexibility to sell and downsize without facing large tax bills. Frequent movers, including military families or workers relocating for jobs, would also benefit since the two-year residency requirement would be removed.
- Example scenarios:
- Single filer, 350,000 dollars gain, tax now 20,000 dollars, tax under proposal 0 dollars
- Married filer, 600,000 dollars gain, tax now 20,000 dollars, tax under proposal 0 dollars
- Married filer, 300,000 dollars gain, tax now 0 dollars, tax under proposal 0 dollars
Policy Debate and Financial Concerns
Supporters say the proposal would encourage housing turnover and allow homeowners to access profits without penalty. Critics warn of substantial federal revenue losses, estimated at 18.7 billion dollars over ten years if only indexing is applied, with a full repeal costing even more. Concerns also exist that some investors may misuse the exemption by claiming rental or vacation properties as primary residences, potentially increasing housing demand and worsening affordability in expensive markets.
Next Steps in Congress
The bill is in early stages but has attracted national attention. Lawmakers are likely to debate alternatives, such as raising the existing exclusion limits or indexing them to inflation, rather than eliminating the tax entirely. The outcome could significantly affect millions of Americans planning to sell their homes in the coming years, while influencing market stability and federal finances.
