President Trump announced on Tuesday that he is considering legislation to eliminate capital gains taxes on primary residences.
“We’re thinking about that,” Trump stated. “But we could also achieve the same effect by lowering interest rates. If the Fed were to lower the rates, we wouldn’t need to implement this. However, we are considering the possibility of removing taxes on capital gains from houses.”
The proposed legislation, introduced by Georgia Republican Congresswoman Marjorie Taylor Greene, aims to completely eliminate capital gains on primary residences.
The capital gains tax is a federal levy imposed when an asset, such as a home, personal property, or investment securities, is sold for more than the seller’s adjusted basis, which is defined by the IRS as the original purchase price of the item.
Currently, the IRS allows an exclusion of up to $250,000 ($500,000 for joint filers) in capital gains from home sales. These limits have not been updated since 1997, when the median U.S. home price was $145,000. Today, that figure has risen to $360,239.
According to a recent study by the National Association of Realtors, over 8 million homeowners exceed the $500,000 cap. By 2030, eight states are projected to have more than 40% of homeowners with equity surpassing the $500,000 cap, increasing to 20 states by 2035.
In total, NAR estimates that 29 million homeowners today (34%) could potentially face capital gains taxes if they were to sell with equity exceeding the $250,000 exclusion cap. This number is projected to increase to 70% (59 million) in 10 years.
Greene’s office claims that her bill would “encourage mobility by eliminating a major disincentive to selling, increase housing supply, provide tax relief to homeowners looking to downsize or relocate without being penalized for appreciation, and protect first-time buyers by enhancing inventory and reducing prices in tight housing markets.”
Republicans recently passed a tax bill that included an increased cap on state and local taxes (SALT) to $40,000, up from $10,000, providing relief to homeowners in wealthier areas.
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