Trump recently suggested that his administration may pursue the elimination of capital gains tax on home sales. In response to a question during an Oval Office meeting, Trump said, “We are thinking about no — no tax on capital gains on houses.”
Eliminating the capital gains tax on home sales could save some sellers money, but it may do little to “unleash the housing market” as suggested by the person asking Trump the question.
“It was purportedly to accelerate homeownership,” says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. “I’m not sure this would reduce the cost of houses any.”
The national median sales price of single-family homes hit a record high of $369,000 in the second quarter of 2025, according to real estate analytics firm ATTOM. Median home ownership costs were less affordable than historic levels in 554 out of 574 counties analyzed by the firm in the first quarter of the year.
Affordability is a significant challenge for many buyers, and it is unclear whether eliminating the capital gains tax would address this obstacle to homeownership.
Some argue that eliminating the tax could spur more people to sell, increase housing inventory and, in turn, lower prices. Others argue that relatively few people currently pay capital gains tax so most people won’t benefit.
[READ: Trump’s One Big Beautiful Bill Includes New Tax Breaks: Will You Benefit?]
Not Everyone Pays Capital Gains Tax on a Home Sale
Capital gains tax is applied to the profit made from the sale of a capital asset, such as stocks, collectibles, fine art or a home.
For those with lower incomes — below $47,025 for single taxpayers or $94,050 for married couples filing jointly — the capital gains tax rate is 0%. Taxpayers with higher incomes pay a rate that is either 15% or 20%. A few assets, such as collectibles, have their own capital gains tax rates, which can be as high as 28%.
When the capital asset is a home, the government allows sellers to exclude a portion of the profit from capital gains tax. Known as a Section 121 exclusion, it is available to people who meet the following criteria:
— Have owned the home for two of the previous five years
— Have used the home as their primary residence for two out of the previous five years
Eligible single taxpayers can subtract $250,000 from the profit of their homes to calculate capital gains tax. Married couples filing jointly can exclude up to $500,000 from their home sale profit. The profit is determined by subtracting a person’s investment in the property from the sale price.
“I get to include my tax basis and any improvements I’ve made,” says Michael Greenwald, director of tax services for accounting firm Berkowitz Pollack Brant.
For instance, if someone purchased a home for $300,000, that would be their tax basis. If they completed a $100,000 renovation, they could add that to their basis for a total of $400,000. If their home sells for $700,000, the profit is $300,000.
Assuming the seller in the example above is eligible for the Section 121 exclusion, a couple would pay no capital gains tax since their $500,000 exclusion would eliminate the $300,000 profit. If the seller is a single taxpayer, they would pay capital gains tax on $50,000 since their $250,000 exclusion is less than the profit.
[READ: What the Trump Tax Plan Could Mean for High Earners]
Who Benefits from Eliminating Capital Gains on Home Sales
In 2023, about 8% of home sales had capital gains exceeding $500,000, according to real estate analytics firm Cotality. Meanwhile, ATTOM reports that the typical home sale in the second quarter of 2025 generated $123,000 in raw profit.
Those numbers indicate that eliminating the capital gains tax might not affect too many sellers right now — assuming they qualify for the tax exclusion. However, some people would benefit.
“It would impact people with mega gains,” says Jeffrey Kelson, partner and co-leader of the national tax office for Eisner Advisory Group. “These are people living in areas where housing has appreciated significantly or they have lived there for a very long time.”
An analysis by the National Association of Realtors indicates that homeowners in Massachusetts, Washington, Utah, California and Hawaii are most likely to benefit from eliminating the capital gains tax on home sales. In all these states, more than 60% of homes have equity that exceeds the $250,000 single taxpayer exclusion.
“You could have a very modest income person who’s bought a home in Los Angeles for $15,000 in 1960 and now it’s worth $15 million,” Luscombe says.
While relatively few people are paying capital gains on their home sale profits now, that number will increase as homes appreciate. The NAR estimates that about a third of homes have more than $250,000 in equity right now, but estimates that percentage could grow to 56% of homeowners in 2030.
How the Capital Gains Tax Could be Eliminated
Eliminating the capital gains tax from home sales may seem like a straightforward proposal, but, “The devil with tax law is always in the details,” Greenwald says.
For instance, simply eliminating capital gains tax on house sales could benefit investors who buy and flip homes for profit. If policymakers want to benefit only homeowners, they may want to retain the criteria used for the current Section 121 exclusion.
That’s the route being taken by U.S. Representative Marjorie Taylor Greene (GA-14) in her proposed No Tax on Home Sales Act. As introduced, this bill would eliminate federal capital gains tax on home sales but keeps the requirements that people live in the home for two out of the previous five years and use it as their primary residence. The legislation has been referred to the House Committee on Ways and Means.
Another option for policymakers might be to revert to a system used prior to the introduction of the current capital gains exclusions in 1997. Before the current exclusions became available, the government allowed homeowners to defer any capital gains tax on their home sale, provided they used the proceeds to purchase a new home.
Keeping the current exclusion and tying it to inflation may also be a possibility. This would not eliminate capital gains tax for all home sellers, but it may significantly reduce the number of people facing a tax bill after selling their property. The current exclusion amounts were enacted in 1997, and, based on the U.S. Bureau of Labor Statistics CPI calculator, they would be worth $507,000 for single taxpayers and $1.014 million for married couples today if they had been tied to the inflation rate.
For now, though, it’s all speculation as to if and how the Trump Administration will attempt to reduce or eliminate the capital gains tax for home sales.
“With Trump’s other campaign promises, (what was promised) wasn’t what we got,” Luscombe says, noting that a campaign promise to eliminate taxes on Social Security benefits ended up resulting in a temporary tax deduction for seniors instead. As for what eliminating capital gains could look like, he says: “It remains to be seen.”
[Related:Trump’s Big Beautiful Bill: What It Really Means for Social Security Taxes]
Opinions Are Mixed Regarding Impact on the Housing Market
Assuming capital gains are eliminated for home sales, opinions are split about its effect on the housing market.
“I’m not sure that it’s the taxes that are holding people back from selling properties,” Greenwald says. “I think interest rates are a much more significant factor.”
Others are more optimistic.
“This would really help spur the market,” Kelson says. In particular, he thinks it could encourage older homeowners to sell their properties.
These are long-time owners with significant equity. Rather than paying a capital gains tax, they may decide to let their children inherit the home. Currently, when a home is inherited, its tax basis is adjusted to the current market value, bringing the equity in the house to $0 for tax purposes.
“Why should I give the (government money) if I can die with the home and my children can sell it without paying any tax at all,” might be the current thinking of some homeowners, says Kelson. However, if the capital gains tax on home sales is eliminated, these older homeowners may be more inclined to sell their properties, which could increase housing inventory and help lower prices.
Of course, any proposal will need to be approved by Congress, and after a contentious debate over the deficits created by the One Big Beautiful Bill Act, some lawmakers may be hesitant to pass further tax cuts.
“Obviously, that’s less revenue to the government,” Greenwald says. However, he thinks the amount lost by eliminating the capital gains tax on home sales would be relatively small. “I can’t imagine that it moves the needle that much.”
Still, it could be a tough sell for some members of Congress, and people shouldn’t count on the proposal becoming law. “I think it’s a long shot,” Kelson says.
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Why Trump’s Idea to Eliminate Capital Gains Tax on Home Sales Probably Won’t Benefit You originally appeared on usnews.com
