Sponsors (122)
The bill raises and indexes the home-sale gain exclusion to give many homeowners—particularly married and high-cost-area sellers—meaningful tax relief on home sales, while reducing federal revenue and disproportionately benefiting higher-value property owners unless offsets are enacted.
Homeowners — especially married couples selling a principal residence — can exclude up to $500,000 (single) or $1,000,000 (joint) of gain from taxable income when selling their main home, reducing or eliminating capital-gains taxes on many sales and increasing after-tax proceeds.
Homeowners (and other taxpayers who qualify) will see the exclusion indexed for inflation so the real value of the exclusion is preserved over time, preventing gradual erosion from rising home prices.
All taxpayers — and federal budget priorities — face reduced federal revenue because higher exclusion thresholds and broader exclusions lower taxable gains, which may increase the deficit unless offsets are provided.
Middle- and higher-income homeowners, particularly owners of expensive homes, may benefit disproportionately from the larger exclusion, worsening the progressivity of the tax code.
The IRS and financial institutions will incur administrative and transitional costs to update rules, systems, and guidance to implement the higher exclusion amounts and annual adjustments.
Based on analysis of 2 sections of legislative text.
Doubles the federal primary-residence gain exclusion amounts (to $500k and $1M) and indexes them annually for inflation starting after 2024.
Introduced February 13, 2025 by James Varni Panetta · Last progress February 13, 2025
Increases the federal income tax exclusion for gain on the sale of a principal residence by doubling the current dollar limits (from $250,000 to $500,000 and from $500,000 to $1,000,000) and requires those two dollar amounts to be adjusted annually for inflation starting after 2024. The changes apply to sales and exchanges after the bill is enacted and amend the Internal Revenue Code provision that governs the principal-residence gain exclusion.