President Donald Trump is weighing capital gains tax changes and a larger home-sale exemption ahead of the November midterm elections, according to statements made this week by National Economic Council Director Kevin Hassett and former Trump adviser Larry Kudlow. Kudlow suggested exemptions for sales of homes worth $2 million or less from capital gains taxes, adding that “the boss is very interested” in those ideas.
Under current law, homeowners can exclude up to $250,000 of capital gains ($500,000 for married couples filing jointly) when selling their primary residence under Section 121 of the Internal Revenue Code, part of the Taxpayer Relief Act of 1997. Any tax changes would require congressional legislation, making it unlikely any of Trump’s ideas could become law before the November midterms, and changes to the tax law ahead of the midterm elections are also “extremely unlikely,” given the tight time frame.
Those with gains above the current exemption are wealthier, higher-income, and older than homeowners below the threshold, with the average net worth for this group at $5.7 million in 2022. In 2022, only about 10% of homeowners had gains exceeding this exemption.
What’s being proposed
Two approaches to cutting capital gains on home sales
The administration is floating both inflation indexing and expanded exemptions
National Economic Council Director Kevin Hassett said Tuesday that Trump wants to enter the midterm campaign focused on what Republicans could deliver if they retain power in Congress, telling Fox Business host Larry Kudlow that “He wants to hit people with the promises of what we are going to do if the Republicans have power in the future.”
Kudlow, who led the council during Trump’s first term and remains an ally, said he had recently spoken with Trump about indexing capital gains, meaning taxes would be applied on gains adjusted for inflation. The concept involves taxing only real gains after stripping out inflation, rather than the entire nominal profit from an asset sale, and another proposal under discussion would exempt capital gains taxes on the sale of homes valued at $2 million or less.
“President Trump is always exploring new ideas to Make America Wealthy Again, but any policy announcements will come from the Administration directly,” White House spokesman Kush Desai told CNBC in an emailed statement. The proposals remain in the discussion phase, with no formal legislation from the administration yet introduced.
The current rules
To claim the exclusion, you generally must have owned and used the home as your principal residence for at least two of the past five years. Single filers can exclude up to $250,000 in capital gains, while married couples filing jointly can exclude up to $500,000. The $250,000 and $500,000 limits have been the same since 1997. Any gain above those thresholds is taxed at long-term capital gains rates, which range from 0% to 20% depending on your income.
Congressional efforts
Bipartisan bills already in committee
Several proposals to expand home-sale tax breaks are pending in Congress
A bipartisan, bicameral proposal from early 2025, the More Homes on the Market Act, would double the capital gains exemptions for primary home sales profits and adjust those figures annually for inflation. The bill would increase the exclusion from $250,000 to $500,000 for single filers and from $500,000 to $1,000,000 for married couples, with annual inflation adjustments beginning after 2024.
The More Homes on the Market Act was introduced into Congress on February 13, 2025, with 122 cosponsors (71 Democrats, 50 Republicans, 1 Independent). The bill remains in committee. You can read the full text of H.R. 1340 on Congress.gov, the official legislative tracking site.
Meanwhile, the No Tax on Homes Sales Act, introduced by former Rep. Marjorie Taylor Greene in mid-2025, would eliminate capital gains taxes on the sale of primary residences. Separately, Republican Senators Ted Cruz of Texas and Tim Scott of South Carolina sent a letter to Treasury Secretary Scott Bessent, asking him to reduce capital gains taxes by indexing a home’s basis with inflation.
Prior administrations, including Trump during his first term, have looked at indexing capital gains to inflation unilaterally without Congress, but legal experts say that would likely face court challenges, and the same move was seriously considered in Trump’s first term and shelved after the department’s own lawyers questioned whether “cost” in the statute can be reinterpreted without Congress.
Who would benefit most
According to the Yale Budget Lab, the top 0.1% of earners would save an average of roughly $350,000 in taxes if the policy were implemented, while the bottom 20% would see virtually no benefit. The current exemption already covers “all but the most valuable homes from tax,” and houses would have to sell for more than $1.25 million to have any exposure to capital gains tax, which constitutes the “luxury threshold” that 90 percent of homes are valued below.
For buyers and sellers
What this could mean for the housing market
Potential impacts on inventory, prices, and who benefits
A higher exemption threshold could give long-term owners who have held off on selling because of the tax bill a stronger incentive to list their properties, and if that expands the housing supply, it could offer some help to first-time home buyers who struggle to enter a market marked by high prices and a shortage of listings. That’s the theory behind the “More Homes on the Market” name—that reducing tax barriers would encourage more people to sell.
The $250,000/$500,000 exclusion worked in the late 1990s, but is now viewed as inadequate by many, and without updates, more homeowners and investors will face capital gains taxes they never expected to have to pay. In high-cost markets like California, Hawaii, and parts of the Northeast, home price appreciation over decades can easily push gains above the current thresholds. If you bought a home in San Francisco for $400,000 in 1995 and sell it today for $1.8 million, your gain is $1.4 million—meaning $900,000 would be taxable for a married couple under current law.
However, critics argue the proposals would primarily benefit wealthy homeowners while doing little for typical buyers. Experts say such an effort would skew benefits to wealthier homeowners. The White House is considering changes that would disproportionately flow to some of the wealthiest US households. For most Americans selling homes, the current $250,000/$500,000 exclusion already eliminates any tax liability.
If you’re considering selling your home, understanding capital gains rules is essential to your financial planning. Learn more about the home selling and buying timeline and how to calculate your potential tax liability. For buyers, any policy that increases inventory could create opportunities, though impacts on housing affordability remain uncertain.
The budget impact
The Yale Budget Lab estimates retroactively indexing assets to inflation that have already been purchased, as well as those in the future, would cost $1 trillion over 10 years, while including only assets purchased after the policy is put into place would lower the decade cost to $170 billion. The Committee for a Responsible Federal Budget, a bipartisan fiscal watchdog, estimates that depending on the scope of application, the resulting revenue loss could range from $170 billion to as much as $950 billion over the next decade.
Quick answers
Capital gains tax on home sales: common questions
How much of my home sale profit is tax-free right now?
Under current law (Section 121), you can exclude up to $250,000 of gain from the sale of your primary residence if you’re single, or up to $500,000 if you’re married filing jointly. To qualify, you must have owned and lived in the home as your main residence for at least two of the five years before the sale. This exclusion can be used once every two years.
What happens if my gain exceeds the $250,000 or $500,000 limit?
Any gain above the exclusion amount is taxed as a long-term capital gain (assuming you owned the home for more than a year). The long-term capital gains tax rates are 0%, 15%, and 20% in 2026. The rate you pay depends on your taxable income. For example, if you’re married and your gain is $700,000, you’d exclude $500,000 and pay capital gains tax on the remaining $200,000.
Would the proposed $2 million exemption apply to all homes under that price?
No. The proposal as described by Kudlow would exempt homes “worth $2 million or less,” but details remain unclear. It’s important to understand that capital gains tax is on your profit (gain), not the sale price. A $2 million home that you bought for $1.8 million would have only a $200,000 gain—already covered by the current $500,000 exclusion for married couples. The proposals would primarily benefit people with very large gains, typically from holding property for decades in appreciating markets.
What is “indexing capital gains to inflation” and how would it work?
Indexing would allow taxpayers to increase their tax basis based on inflation between the time an asset is acquired and when it is sold, which could reduce taxable gains on assets such as stocks, bonds, real estate and other investments. For example, if you bought a home for $300,000 in 2000 and inflation has increased 75% since then, your inflation-adjusted basis would be $525,000. If you sell for $800,000, your taxable gain would be $275,000 instead of $500,000. This would reduce or eliminate capital gains taxes for many long-term homeowners.
Is any of this likely to become law before the midterm elections?
No. Changes to the tax law ahead of the midterm elections are “extremely unlikely,” given the tight time frame. Any change to capital gains taxation requires an act of Congress, and even with bipartisan support for the More Homes on the Market Act, the bill remains in committee with no scheduled vote. These proposals are currently campaign talking points rather than imminent policy changes.
Should I delay selling my home in hopes these tax cuts pass?
That’s a decision only you can make based on your personal circumstances, but tax professionals generally advise against timing major life decisions around speculative tax policy changes. The proposals have no clear path to enactment, face significant budget concerns, and could take years to pass even with political will. If you need to sell for financial, health, or family reasons, the current $250,000/$500,000 exclusion already protects most homeowners from any tax. Consult with a financial advisor or tax professional about your specific situation before making decisions.