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By Hugh Cameron
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Several proposals currently gathering momentum in Congress to eliminate or revise the capital gains tax could incentivize more homeowners to list their properties, experts say, potentially boosting the sluggish housing sector.
This is according to a report from Realtor.com, based on conversations with lawmakers at the National Association of Realtors (NAR) policy forum in Washington, D.C., last week.
"Roughly a third of all homes that could be on the market could be subjected to that tax and it's locking people in," NAR chief advocacy officer Shannon McGahn said in the report. "It's great to see that there's bipartisan support."
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Why It Matters
Some experts tell Newsweek that an update to capital gains tax and its thresholds is long overdue, given that these were set in 1997, and that this could inject some energy into America’s subdued housing market. However, they acknowledge that such policies could have difficulty gathering sufficient support on Capitol Hill, as they could be seen as a “giveaway” to affluent homeowners at a time when much of the country is facing significant affordability strains.
What To Know
In housing, capital gains tax applies to profits made when selling a property. For primary residences, owners can qualify for the home-sale exclusion of up to $250,000 of net gain for single filers or up to $500,000 for married couples filing jointly.
However, as Realtor.com notes, these limits have not been changed or adjusted for inflation in nearly three decades, prompting some lawmakers to propose changes that would “encourage more long-term homeowners to sell without being slapped with a huge tax bill.”
“With the U.S. housing market estimated to be roughly five million homes short, we believe capital gains relief is one of several important tools that can help encourage existing homeowners to sell and put more homes back on the market,” NAR's McGahn told Newsweek.
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McGahn told Newsweek that one of the main approaches in the current Congress is the More Homes on the Market Act, introduced by Democratic Representative Jimmy Panetta of California. This would double the exclusion limits to $500,000 for individual filers and $1 million for married couples, and index them to inflation. The bill currently has 94 cosponsors, according to Realtor.com, and Panetta told the group his proposal was gathering “more and more momentum" in D.C.
Realtor.com senior economist Joel Berner told Newsweek that “several proposals” currently being debated in Congress, including those to remove the tax outright, could “chip away at a different version of the lock-in effect.”
“Rather than homeowners being incentivized to keep their current home because of holding a lower-than-market mortgage rate, we see also that would-be sellers don't want to list their home for fear of a major tax bill coming from the appreciation of their home since they bought it,” Berner said.
Berner told Newsweek that 2025 was “the slowest year since 1995 in terms of home sales,” and said that current exclusionary limits were likely keeping many owners from selling and worsening the prevalent inventory problems.
“Critics contend that this is another tax break for the wealthy, but the health of the housing market may very well be at stake," he added.
But according to the real estate brokerage Redfin, there is currently “no clear indication these proposals are advancing quickly through Congress.”
Redfin estimates that eliminating capital gains tax could “boost for-sale inventory by roughly seven percent annually,” but told Newsweek that such policies “would be costly for the government and disproportionately benefit wealthier sellers unless paired with limits or a temporary duration.”
What People Are Saying
Shannon McGahn, executive vice president and chief advocacy officer at the National Association of Realtors, told Newsweek: “We’re encouraged to see bipartisan proposals moving forward and are actively engaging with Congress and the Administration to advance solutions that provide meaningful relief, improve market mobility, and expand opportunity for buyers across the country.”
“Modernizing the exclusion could help unlock existing inventory by reducing the tax ‘stay-put penalty’ that discourages longtime owners—especially seniors and households in fast-appreciating markets—from selling, downsizing, or relocating,” she added. “More resale supply can ease pressure in many markets and help reduce the intensity of bidding, supporting a healthier pace of transactions.”
Realtor.com senior economist Joel Berner told Newsweek: “The measures to eliminate or decrease the impact of capital gains tax would lead to an increase in the number of homes for sale, providing more options at lower prices to prospective buyers, boosting home sales activity.”
What Happens Next
In recognition of the slow pace of housing activity in the U.S. and the inability of many prospective buyers to get on the property ladder, the administration has recently advanced several proposals to improve housing affordability. This included an in-progress ban on “large institutional investors” purchasing single-family homes, and President Donald Trump directing Fannie Mae and Freddie Mac to purchase $200 billion worth of mortgage bonds, which he has said will “drive Mortgage Rates DOWN.”
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