Sponsors (3)
The bill preserves the $250,000 surviving-spouse capital-gains exclusion for a narrower set of inheriting homeowners but increases the risk that many surviving spouses will lose that tax break (if they sell after two years, remarry within the taxable year, or fail ownership/use tests), shifting more tax burden onto those heirs.
Surviving homeowners who inherit a deceased spouse's principal residence and meet the bill's narrowed timing and ownership/use conditions can still exclude up to $250,000 of capital gains when they sell the home.
Surviving spouses who sell the inherited principal residence more than two years after the spouse's death will lose the $250,000 capital-gains exclusion, increasing taxable gain and potential tax liability for many middle-class families.
Survivors who did not meet the ownership and/or use tests immediately before the deceased spouse's death (for example, who were living elsewhere at the time) may be disqualified from the exclusion, reducing relief for some heirs.
Surviving spouses who remarry before the end of the taxable year become ineligible for the surviving-spouse rule, which can increase tax on a later sale of the inherited home.
Based on analysis of 2 sections of legislative text.
Halves the surviving-spouse home-sale capital gains exclusion from $500,000 to $250,000 for sales more than two years after the spouse's death and requires the survivor to remain unmarried through the taxable year of sale.
Official title: To amend the Internal Revenue Code of 1986 to give individuals with deceased spouses the same exclusion of gain from the sale of a principal residence as is allowed to married couples, regardless of how much time has passed since such death.
Introduced February 4, 2026 by Tom Barrett · Last progress February 4, 2026
Cuts the capital-gains exclusion available to a surviving spouse when selling a principal residence more than two years after the spouse's death. The bill replaces the current $500,000 dollar limit for that surviving-spouse special rule with $250,000 and requires the surviving spouse to remain unmarried through the close of the taxable year of sale to qualify for the reduced exclusion. The change applies to sales and exchanges in taxable years beginning after the bill is enacted, narrowing an existing tax benefit that previously treated a surviving spouse like a joint return filer in certain circumstances.