U.S. Reps Jimmy Panetta (D-CA) and Mike Kelly (R-PA) introduced legislation that seeks to incentivize homeowners to sell their properties, increasing the housing supply and alleviating affordability challenges.
The bipartisan More Homes on the Market Act (H.R. 1340) would raise the capital gains tax exclusion on the sale of a primary residence from $250,000 to $500,000 for single filers and from $500,000 to $1 million for joint filers. These thresholds were originally set in 1997 and have never been adjusted for inflation. As such, they have made it increasingly difficult for homeowners to sell without facing significant tax burdens.
“As home prices rise and tax exemptions stay the same, homeowners feel financially locked into their homes and homebuyers feel locked out of the housing market,” Panetta said. “By modernizing the capital gains exclusion, our bipartisan More Homes on the Market Act will enable more people to sell their homes, downsize if they choose, and retain the savings they’ve built over a lifetime. This commonsense fix will expand housing inventory, ease affordability challenges, and help more families achieve the dream of homeownership.”
Housing experts say the outdated capital gains tax exclusion is a major contributor to the nation’s tight housing market. If the exclusion had been indexed to inflation, it would stand at approximately $500,000 for single filers and $1 million for joint filers today.
“As housing prices have increased, people who have chosen to downsize have been unfairly punished with massive tax burdens,” Kelly said. “After years of making improvements and investments into their homes, which is the largest purchase for most Americans, homeowners deserve to keep more of their hard-earned money during their golden years.”
Along with Panetta and Kelly, the bill was sponsored by Reps. Nicole Malliotakis (R-NY), Suzan DelBene (D-WA), Rudy Yakym (R-IN), and Lou Correa (D-CA).