On July 10, 2025, Rep. Marjorie Taylor Greene (R-Ga.) introduced the No Tax on Home Sales Act — a bill that proposes eliminating capital gains taxes on the sale of primary residences. President Trump also commented that he is “thinking about eliminating the tax on capital gains from houses.”
Prior to 1997, if you sold your personal residence and bought another home within 18 months, you could defer the entire capital gains tax as many times as you wanted, provided the replacement home was of equal or greater value than the sale price of the previous home. If a seller did not purchase another home, those aged 55 or older could claim a one-time capital gains exclusion of up to $100,000 on the sale of their principal residence, as long as they had lived in the home as their primary residence for at least three of the previous five years.
That changed with the Taxpayer Relief Act of 1997, which remains in effect today. This law allows homeowners to exclude up to $250,000 in gains from taxation when selling their personal residence or up to $500,000 for married couples without any age requirement or the need to purchase a replacement home.
California Rules on Capital Gains Taxes and Who Exceeds the Exemption
As of January 1, 2015, California’s Franchise Tax Board conforms to federal rules for the residency exclusion. However, any gain above the excluded amount is subject to California income tax, which ranges by income level up to 13.3%. In addition to the federal capital gains tax, high-income earners may also be subject to the Net Investment Income Tax (NIIT). Altogether, a California resident could face an effective tax rate of around 33% on gains exceeding the federal exclusion.
According to the National Association of Realtors, about 29 million U.S. homeowners would exceed the $250,000 exemption for single filers, and about 8.5 million would exceed the $500,000 threshold for joint filers. CoreLogic reported that in 2023, roughly 8% of the 4.8 million homes sold in the U.S. had gains exceeding $500,000.
Even if the IRS eliminates capital gains taxes on personal residence sales, it’s unlikely that California would follow suit, given its ongoing budget challenges. The State may retain some level of exemption but still tax gains above that threshold—potentially up to 13.3%.
Impact on Homeowners, Seniors, and Estate Planning
The biggest beneficiaries would be long-time homeowners in expensive markets like the San Francisco Bay Area, where it’s common for sellers to realize over a million dollars in gains. This often creates a “lock-in effect,” where homeowners hesitate to sell due to the hefty capital gains tax bill. For seniors with significant appreciation, estate planners often advise holding onto the home so that heirs can benefit from a step-up in basis and potentially sell the property tax-free. In 2025, the federal estate tax exemption is set at $14 million per individual or $28 million for married couples.
However, even the best estate planning can unravel. For example, when an elderly homeowner must move to a care facility—which can easily cost $10,000 per month, and up to $20,000 per month if memory care is needed—they may need to sell their home to cover those expenses. But doing so could result in hundreds of thousands of dollars in taxes, reducing the funds available for care. Reverse mortgages can complicate things further, as they may force the sale of a home if the homeowner moves out permanently.
Market Reactions and Fiscal Impact
News of a possible capital gains tax repeal on home sales may cause some homeowners in expensive markets to hold off on selling in the short term. People who had previously decided to sell and accept the tax hit might now choose to wait and see how the proposal develops—since for many, it could mean saving hundreds of thousands of dollars.
In the long run, this tax change could lead to an increase in home sales, as homeowners no longer feel locked in by taxes. However, many may still feel trapped by their low-interest-rate mortgages and may be reluctant to swap into a new home with a much higher rate.
First-time homebuyers could be the ones who lose out. This potential change may drive home prices higher and does little to address the ongoing housing shortage. It would simply allow existing homeowners to upsize or downsize with more cash in hand, enabling them to bid more competitively on their next purchase. On the flip side, more empty nesters might choose to downsize, potentially freeing up larger homes for growing families looking to trade up.
From a fiscal standpoint, the U.S. Treasury Department would take only a relatively small hit. Since only a fraction of home sales exceed the $500,000 gain threshold, some estimates suggest an annual revenue loss of just $2 billion, compared to the nearly $5 trillion the federal government collects each year.
Let’s see how it plays out.
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