Sponsors (142)
The bill increases and indexes the tax-free gain exclusion on home sales, giving substantial, ongoing tax relief to many homeowners (especially in high-cost areas) while reducing federal revenue and skewing benefits toward owners of pricier homes, with modest administrative costs to implement.
Homeowners (single and joint filers) can exclude larger amounts of capital gains when selling a principal residence—up to $500,000 for single filers and $1,000,000 for joint filers—reducing or eliminating federal tax on typical home-price appreciation.
The exclusion will be indexed for inflation annually, preserving its real value over time and preventing gradual erosion of benefits as home prices rise.
Sellers in high-cost housing markets are less likely to owe capital gains tax on ordinary appreciation, making it easier to move or downsize without a tax penalty.
Raising the exclusion thresholds will reduce taxable income nationwide and likely lower federal revenue, increasing deficits unless offset by other revenue or spending changes.
The larger exclusion disproportionately benefits owners of more expensive homes and higher-income sellers, which could weaken tax progressivity and provide larger dollar benefits to wealthier households.
The IRS and related agencies will need to update rules, systems, and guidance to implement higher amounts and cost-of-living adjustments, creating administrative costs and transitional burdens.
Based on analysis of 2 sections of legislative text.
Raises the dollar limits on the tax exclusion for gain on the sale of a primary residence and indexes those limits for inflation, effective for sales after enactment.
Official title: To amend the Internal Revenue Code of 1986 to increase the exclusion of gain from the sale of a principal residence, and for other purposes.
Introduced February 13, 2025 by James Varni Panetta · Last progress February 13, 2025
Raises the dollar limits on the tax exclusion for gain from the sale of a taxpayer's principal residence and requires those limits to be adjusted annually for inflation starting after 2024. The change increases the exclusion amounts (doubling the current statutory thresholds) and applies to sales and exchanges after the law is enacted. The bill changes 26 U.S.C. §121 to replace the existing $250,000/$500,000 limits with higher amounts (text indicates $500,000 and $1,000,000) and adds a cost‑of‑living adjustment formula so the two dollar amounts increase each year with inflation for taxable years beginning after 2024.