No Capital Gains Tax on Home Sales Legislation: What to Know

The current tax structure creates challenges for homeowners who have seen their property values soar over recent years. Many find themselves facing substantial tax bills that can eat into their profits from selling their home.

Now, rising home values have created a “lock-in effect” where homeowners choose not to sell rather than face substantial tax consequences. This reduces housing market inventory and limits options for buyers.

Understanding Capital Gains Tax on a Primary Residence

Capital gains tax on primary residence sales applies to the profit you make from selling your home. The federal government treats this profit as income, subject to specific tax rates depending on how long you owned the property and your overall income level.

Currently, homeowners can exclude up to $250,000 in capital gains for single filers or $500,000 for married couples filing jointly from their taxable income. These exclusion limits represent significant tax benefits for homeowners, but they haven’t been adjusted for inflation since their establishment in 1997.

To qualify for this exclusion, you must meet specific criteria that the IRS strictly enforces:

• You must have owned the home for at least two years during the five-year period before the sale
• The property must have been your primary residence for at least two years during the same five-year period
• You cannot have used the exclusion on another home sale within the two years before the current sale
• The home must be your main residence, not an investment property or second home

What Is the More Homes on the Market Act?

The More Homes on the Market Act (2025) represents a bipartisan effort to modernize the federal tax code’s treatment of home sales. Representatives Jimmy Panetta (D-Calif.) and Mike Kelly (R-Pa.) introduced this legislation to address the outdated exclusion limits that haven’t kept pace with inflation or rising home values.

Key provisions of the More Homes on the Market Act of 2025 include:

• Double current exclusion limits to $500,000 for individuals and $1 million for married couples
• Index exclusion limits to inflation moving forward
• Apply to primary residence sales only

The goals of the bill include:

• Reduce the “lock-in effect” preventing home sales
• Increase housing supply by encouraging more sales
• Provide relief for homeowners in high-cost markets
• Benefit seniors downsizing and families relocating

Ultimately, this legislation specifically addresses how current tax law capital gains home sale policies have become outdated due to inflation and property value appreciation over the past two decades.

What Is the No Tax on Home Sales Act?

The No Tax on Home Sales Act (2025) is proposed by Representative Marjorie Taylor Greene (R-Ga.) and takes a more comprehensive approach to addressing capital gains concerns.

Key provisions of the No Tax on Home Sales Act include:

• Completely eliminate federal capital gains tax on house sale transactions for primary residences
• Apply only to everyday homeowners, not real estate investors or house flippers
• Remove all federal tax obligations on primary residence profits

This legislation reflects the philosophy that homeowners shouldn’t face federal tax penalties for profiting from their primary residence sales. It aims to completely overhaul current home sale capital gains tax policy by eliminating it entirely for primary residences.

Griffin Funding is proud to support the No Tax on Home Sales Act (H.R. 4327), which would eliminate the federal capital gains tax on sales of primary residences.

Comparing the Two Bills: What’s at Stake?

The More Homes on the Market Act has bipartisan support, suggesting broader potential acceptance in Congress. Its incremental approach appeals to budget-conscious lawmakers concerned about revenue impacts.

The No Tax on Home Sales Act faces greater political challenges as a more partisan initiative but could generate strong grassroots support. Its complete elimination of capital gains taxes raises economic feasibility questions due to significant potential revenue loss.

Additionally, each bill could significantly impact housing inventory, affordability, and homeowner behavior.

Housing Inventory:

• The More Homes on the Market Act would gradually increase in sales, particularly in high-cost markets
• The No Tax on Home Sales Act could potentially dramatically increase in selling activity across all markets

Affordability:

• The More Homes on the Market Act could moderately impact on prices through increased supply
• The No Tax on Home Sales Act could significantly boost inventory, potentially moderating price growth

Homeowner Behavior:

• The More Homes on the Market Act encourages strategic selling in expensive markets
• The No Tax on Home Sales Act removes tax considerations from selling decisions entirely

Potential Impact on Homeowners and the Housing Market

Both pieces of legislation could provide benefits for homeowners in expensive markets where property appreciation has pushed sale profits well beyond current exclusion limits. Areas like California, New York, and Florida, where home values have increased dramatically, would see the most immediate impact from either reform.

The reforms could particularly benefit several groups:

• Seniors looking to downsize who purchased homes decades ago at much lower prices
• Families needing to relocate for employment opportunities
• Homeowners in gentrified neighborhoods where property values have increased rapidly
• Military families who may not meet current residency requirements

However, both bills also face potential concerns about their broader economic impacts. Critics argue that these tax changes primarily benefit higher-income homeowners who own valuable properties, potentially creating regressive tax policy that provides greater benefits to wealthy individuals. The revenue implications for federal tax collections could also be substantial, particularly under the No Tax on Home Sales Act.

Ultimately, both bills directly address broader housing challenges by tackling supply shortages. The home sale capital gains tax burden has become a significant barrier preventing homeowners from selling. By reducing or eliminating these tax obstacles, both pieces of legislation aim to unlock additional housing supply that could help moderate price growth and improve market accessibility for buyers.

What Homeowners Should Do Now

If you’re a current homeowner, stay informed about developments regarding new tax law on home sale capital gains, as either piece of legislation could impact financial planning and selling strategies.

The timing of any sale could matter significantly depending on which legislation passes and when it takes effect. Additionally, changes in mortgage rates and tax policy often create interconnected effects on the housing market, making it important to consider both factors when planning a home sale or purchase.

Consider working with tax advisors and mortgage professionals to understand how current rules apply to your situation. Griffin Funding’s mortgage experts can provide guidance on how tax considerations integrate with home financing strategies.

Interested in supporting the No Tax on Home Sales Act? Here are some steps you can take:

1. Contact your congressional representatives: Let your representatives know that you support H.R. 4327 and believe homeowners should be allowed to keep more (or all) of the gain when selling a primary residence.
2. Reach out to relevant House Committees: This bill is currently referred to the House Ways and Means Committee. They decide which bills move forward.
3. Share and amplify the message: Use social media to let people in your networks know about this proposal. Tag and message other homeowners, local media, and associations.
4. Support or join advocacy groups: Organizations like the National Association of Realtors have expressed support for both the No Tax on Home Sales Act and the More Homes on the Market Act.

The Future of Capital Gains Tax on Home Sales

Both legislative proposals reflect growing recognition that current tax law capital gains home sale rules need significant updates for modern housing market realities. Reform efforts are gaining momentum due to inflation pressures, rising housing costs, and recognition that current tax policy may worsen housing supply problems.

The More Homes on the Market Act’s bipartisan nature suggests potential for compromise solutions, while the No Tax on Home Sales Act represents a more comprehensive approach that could reshape home sale taxation entirely. Both bills address the fundamental issue that exclusion limits haven’t been updated since 1997.

Griffin Funding remains committed to helping homeowners navigate these complex decisions under current or future tax rules. Our comprehensive mortgage services and expert guidance help you understand how tax considerations fit into your overall home financing strategy.

For personalized assistance and innovative tools like the Griffin Gold app, contact our team to explore your options in today’s evolving housing market. Or, if you’re ready to lock in a mortgage, get started online today.

Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 24 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 12 years in business.