A proposed federal bill would double the capital-gains tax exclusion for homeowners, raising the limit to $1 million for individuals [1].
Lawmakers believe the change will incentivize homeowners, particularly seniors, to sell their properties. This shift aims to increase the supply of available housing in a market struggling with low inventory [1], [2], [3].
Under the More Homes Market Act, the exclusion for married couples would rise to $2 million [1]. The current tax break has remained frozen since 1997 [1]. By raising these thresholds, the bill intends to remove the tax burden that prevents some owners from downsizing or relocating.
Supporters of the legislation said the higher exclusion would encourage more owners to put their homes on the market [1], [2]. This is viewed as a primary mechanism to free up housing stock for new buyers [3].
Reports on the bill vary regarding its sponsorship and duration. Some sources describe the legislation as a bipartisan effort [1], while others characterize it as a GOP bill [3]. Additionally, while some reports imply a permanent change to the tax code [1], others suggest the tax break for seniors could be temporary [2].
If passed, the act would significantly alter how the IRS treats profit from the sale of a primary residence. Senior homeowners, who often hold substantial equity in homes purchased decades ago, would be the primary beneficiaries of the $1 million tax break [2], [3].
“The tax break has been frozen since 1997.”
This legislation targets the 'lock-in effect,' where homeowners avoid selling because the tax hit on their accumulated equity outweighs the benefit of moving. By doubling the exclusion, the government is attempting to use tax policy to artificially stimulate housing supply without relying on new construction, specifically targeting the senior demographic to unlock larger family homes for the broader market.
