The ‘stay-put penalty’ contributed to constrained housing supply, industry experts said.
President Donald Trump is considering supporting a bill to eliminate the capital gains tax on home sales.
Trump has spoken favorably about the proposal on two separate occasions in July, saying ending the levy would create sufficient incentives for homebuyers to list their properties for sale.
Earlier in July, Rep. Marjorie Taylor Greene (R-Ga.) introduced the No Tax on Home Sales Act—H.R. 4327.
The bill would adopt housing policies similar to those in Canada and Switzerland, aimed at increasing housing supply.
Under Greene’s legislative initiative, any profit, no matter how large, would be tax-free if the home was a primary residence.
“The capital gains tax on home sales is an outdated, unfair burden—especially in today’s housing market, where values have skyrocketed,“ she said. ”My bill fixes that.”
With Congress in recess, the bill has yet to have any hearings or markups, and it is unclear how much congressional support the legislation can garner.
Greene thanked the president for his support.
“Thank you, President Trump, for supporting my No Tax on Home Sales Act!” Greene wrote on X. “You worked for it. You should keep it. Let’s get this bill passed!”
How It Would Work
The federal government maintains long- and short-term capital gains tax rates, depending on the owners’ income levels.
Exemptions are allowed, with sellers permitted to exclude home sale profits of up to $250,000 for individual tax filers and up to $500,000 for joint filers.
If a married couple purchased a four-bedroom home for $400,000 in the 1990s and sold it for $1.2 million in 2025, their capital gain would be $800,000. Under current law, they could exclude up to $500,000, leaving $300,000 subject to tax.
At a 20 percent capital gains rate, they would owe $60,000. The proposed legislation would eliminate this tax burden—saving them the full $60,000.
These exemption limits have not been updated in nearly 30 years, and industry figures suggest that millions of homeowners have already reached this threshold.
National Association of Realtors data indicate that one-third of homeowners, or about 29 million people, have enough equity to surpass the $250,000 exemption limit.
Ten percent, or 8 million people, also have enough equity to exceed the $500,000 limit.
By 2030, the group projects that more than half (56 percent) of homeowners will have equity surpassing the $250,000 limit.
In high-priced markets, such as California and Massachusetts, the trend is more pronounced, the association noted.
Over the next 10 years, 20 states could have more than 40 percent of homeowners facing a capital gains tax because they accumulated enough equity over time.
Shannon McGahn, executive vice president and chief advocacy officer at the National Association of Realtors, said any serious proposal to address capital gains thresholds is welcomed.
“This is not about speculation; it’s about fairness,” McGahn told The Epoch Times. “A homeowner shouldn’t be taxed like an investor. This is about protecting equity and helping the entire market function more efficiently.
“President Trump’s comments reflect growing momentum for reform, and we’re encouraged to see this issue gaining attention at the highest levels.”
Unlocking Supply
Industry experts have regularly championed abolishing the capital gains tax on houses to help alleviate the supply pressures prevalent in the real estate market.
Years of underbuilding and the Federal Reserve’s decision to cut interest rates to zero percent at the onset of the COVID-19 pandemic, which created a lock-in effect, prevented owners from moving, contributing to the current housing conditions.
The tight market has led to skyrocketing home valuations. According to Redfin, the median selling price for U.S. homes is $447,435, up by more than 40 percent from five years ago.
Housing supply has improved recently, with activity inventory—the total number of homes currently listed for sale—climbing by nearly 29 percent year-over-year in June.
However, according to Realtor.com data, active stocks are still down by more than 11 percent from June 2019.
Delistings—sellers taking their properties off the market—have also soared by 35 percent year-to-date and are surging faster than active inventory, according to the organization.
“Buyers are seeing more choices than they’ve had in years, but many sellers, anchored by peak price expectations and upheld by strong equity positions, are deciding to step back if they don’t get their number,” said Danielle Hale, chief economist at Realtor.com.
The capital gains tax—housing economists refer to it as a “stay-put penalty”—acts as a disincentive for homeowners to list their houses on the open market.
This eventually squeezes the younger generation of homebuyers and puts pressure on home prices, McGahn said. Removing the tax could stimulate housing turnover.
“This stagnation in housing turnover is rippling through the entire market, driving up costs and limiting opportunity—exactly the opposite of what public policy should be encouraging,” McGahn said. “And it grows worse each month.”
McGahn noted that despite concerns that this would only benefit high-income households, many middle-class families are also penalized by capital gains taxes because they have “simply owned their homes for a long time in fast-growing markets.”
Investor Kevin O’Leary called the proposal “common sense.”
“No capital gains tax on your primary home means young families can grow without getting punished,” he wrote on X.
“Want people to take on mortgages and build wealth? Don’t tax them to death when they trade up. It’s common sense.”
Ultimately, according to the president, gutting the federal capital gains tax might not be necessary if the U.S. central bank lowers interest rates, potentially offering mortgage relief.
“If the Fed would lower the rates, we wouldn’t even have to do that,” he said during a July 22 meeting with Philippine President Ferdinand Marcos Jr.
For the week that ended on July 17, the average 30-year fixed-rate mortgage is 6.75 percent, little changed from a year ago.
Written by Andrew Moran for The Epoch Times ~ July 29 2025
