On Tuesday, August 12, 2026, National Economic Council Director Kevin Hassett told Fox Business host Larry Kudlow that the Trump administration is exploring new tax policy pledges to present to voters ahead of the November midterm elections, including a proposal to exempt home sales worth $2 million or less from capital gains taxes. Kudlow, who led the council during Trump’s first term, said he had recently spoken with Trump about indexing capital gains for inflation, and that the president “liked the idea of the indexing, he liked the idea of a bigger exemption.”
A change to the home sale capital gains exclusion would require action from Congress, and it’s unclear how interested the administration is in pursuing the idea. “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. Changes to the tax law ahead of the midterm elections are also “extremely unlikely,” given the tight time frame, said Jude Boudreaux, a certified financial planner and partner and senior financial planner with The Planning Center in New Orleans, Louisiana.
Experts say the benefits of the capital gains proposal or exempting home sales from levies would be heavily tilted toward the wealthy, and changing the federal capital gains tax system generally requires Congress, meaning the administration would need lawmakers to agree on legislative language, revenue effects and eligibility requirements.
What’s on the table
Two separate proposals: indexing and a bigger home-sale exemption
The White House is considering two distinct capital gains tax changes, each with different mechanics and beneficiaries.
The first idea involves indexing capital gains for inflation before taxes are calculated, meaning that taxes would be applied on gains adjusted for inflation. Under this approach, the purchase price (or “basis”) of an asset would be adjusted upward to account for inflation over the years you held it, reducing the taxable gain. For example, if you bought a home for $300,000 in 2005 and sold it for $800,000 in 2026, your gain today is $500,000. But if your basis got inflation-adjusted from 2005 dollars to 2026 dollars, that $300,000 cost might be treated as roughly $480,000—and your taxable gain shrinks to about $320,000.
The second proposal focuses specifically on home sales. Two specific ideas are on the table: a larger home-sale exemption—potentially excluding home sales worth $2 million or less from capital gains taxes entirely, up from the current $500,000 exemption for married couples. This would be a dramatic expansion of the existing Section 121 exclusion.
Past administrations, including Trump’s first, examined indexing capital gains via Treasury regulation without Congress. Legal experts say that route would likely face court challenges. It’s not clear Treasury is allowed to do it. 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. Do it anyway and it lands in court within the week.
Current law: the $250,000/$500,000 exclusion
Eligible homeowners can exclude up to $250,000 in gains ($500,000 for married couples filing jointly) when they sell their primary residence. To qualify, the taxpayer must meet a use test (has lived in the house for at least two years out of the last five years) and an ownership test (has owned the house, also for two years out of the last five). This is Section 121 of the Internal Revenue Code, part of the Taxpayer Relief Act of 1997. The $250,000 and $500,000 limits have been the same since 1997. The official IRS guidance is published in Publication 523, Selling Your Home, and the basic rules are summarized on the IRS website at Topic 701, Sale of Your Home.
Who benefits
The proposals would disproportionately help the wealthiest households
Only a small fraction of homeowners currently pay capital gains tax on home sales, and they tend to be much wealthier than average.
In 2022, only about 10% of homeowners had gains exceeding the current exemption, according to analysis from Yale University’s Budget Lab. Those with gains above the exemption are wealthier, higher-income, and older than homeowners below the threshold. In 2022, the average net worth for this group was $5.7 million.
In 1997, the median U.S. home price was about $127,000. The $250,000/$500,000 exclusion effectively shielded nearly all typical home sales from capital gains taxes. Today, median home prices range from $400,000 to $460,000 nationwide, with many markets exceeding $1 million. Adjusted for inflation, the 1997 thresholds are approximately $475,000 for singles and $950,000 for married couples in 2024 dollars.
Opponents could counter that the policy would primarily benefit wealthy households and could reduce federal revenue. The Congressional Budget Office estimated the fiscal deficit at $1.8 trillion for the first ten months of 2026, giving deficit-conscious lawmakers reason for caution even within the GOP.
By the numbers
Only 10% of homeowners in 2022 had capital gains above the current exclusion limits. Those who would benefit had an average net worth of $5.7 million. The median U.S. home price has risen from $127,000 in 1997 to between $400,000 and $460,000 today. Adjusted for inflation, the 1997 exclusion thresholds would be roughly $475,000 for singles and $950,000 for married couples in 2024 dollars.
Congressional action
Multiple bills already pending, but none have passed
Several pieces of legislation to expand or eliminate the home-sale capital gains tax are working their way through Congress.
In the 119th Congress, two bills have been introduced: H.R. 1340 (Panetta) to double the exemptions and index them for inflation and H.R. 4327 (Greene) to eliminate the ceiling. The No Tax on Home Sales Act (H.R. 4327), introduced by Rep. Marjorie Taylor Greene on July 10, 2025, removes the dollar caps entirely for a primary residence. No $250k, no $500k—just no federal capital gains tax on your main home, full stop. It’s sitting in the Ways and Means Committee.
In 2025, bipartisan House and Senate lawmakers introduced the “More Homes on the Market Act,” which could double the current capital gains exemptions for primary home sales profits and adjust those figures annually for inflation. The House bill was referred to the Ways and Means Committee, where it remains. If enacted as drafted, the exemptions would rise to $500,000 for single filers and $1 million for married couples filing jointly, up from $250,000 and $500,000, respectively.
According to The Washington Post, Sens. Cruz and Scott sent a letter to Treasury Secretary Scott Bessent urging the Trump administration to use regulatory authority to reduce capital gains taxes without waiting for Congress. Secretary of the Treasury Scott Bessent received a letter from members of Congress’ Real Estate Caucus, urging an adjustment to the calculation of capital gains to account for inflation. The letter’s signors state that “taxing these phantom gains can discourage housing mobility, lock up housing supply, penalize long-term homeowners, and distort real estate investment decisions.”
None of it has passed. As of mid-2026, the exclusion hasn’t budged a dollar. You can track the status of these bills on Congress.gov, the official legislative information site maintained by the Library of Congress.
What to do
How this affects your home-sale planning
If you’re thinking about selling your home, here’s what you need to know right now.
The current law is still in effect. If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. In general, to qualify for this exclusion, you must meet both the ownership test and the use test. If you are filing jointly with your spouse, either you or your spouse must meet the ownership test while both you and your spouse must meet the use test individually.
Do not delay a sale in hopes that a larger exemption will pass. Congressional negotiations could take months, and changes to the tax law ahead of the midterm elections are “extremely unlikely,” given the tight time frame. Even if a bill eventually passes, it may not apply retroactively to sales completed before the effective date.
If you expect your gain to exceed the current exclusion limits, consult a tax professional before you sell. Strategies such as documenting capital improvements (which increase your basis and reduce your taxable gain) or understanding partial exclusions for special circumstances can make a significant difference. You can find detailed information about calculating your gain, tracking improvements, and special rules in IRS Publication 523.
For broader guidance on the home-buying and selling process, including how to manage affordability and financing, and to understand the full timeline of a real estate transaction, explore the state-by-state resources on this site. If you’re a first-time buyer weighing whether to wait for policy changes, read our guide to first-time buyer programs and down payment assistance that are available right now.
Quick answers
Capital gains on home sales: common questions
How much of my home sale gain is tax-free under current law?
Under Section 121 of the Internal Revenue Code, you can exclude up to $250,000 of capital gain 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 primary residence for at least two of the five years before the sale. The exclusion can be used once every two years.
What is the $2 million home-sale exemption being discussed?
It’s a proposal floated by Trump administration officials that would exempt home sales worth $2 million or less from capital gains taxes entirely. This would be a major expansion from the current $500,000 exclusion for married couples. The proposal has not been formally introduced as legislation, and would require Congressional approval to become law.
What does “indexing capital gains for inflation” mean?
Indexing would adjust the purchase price (basis) of an asset upward to account for inflation over the time you held it. This reduces your taxable gain by removing the portion that’s due to the dollar losing value rather than real appreciation. For example, a $300,000 home bought in 2005 might have an inflation-adjusted basis of $480,000 in 2026, reducing your taxable gain when you sell.
Who would benefit most from these proposals?
Wealthier homeowners. Only about 10% of homeowners currently have gains that exceed the existing $250,000/$500,000 exclusion, and in 2022 that group had an average net worth of $5.7 million. The proposals would provide little or no benefit to the 90% of homeowners whose gains already fall below the current exclusion limits.
Could these changes happen before the November 2026 midterms?
Extremely unlikely. Any change to the capital gains tax code requires Congressional legislation, and experts say the tight timeframe before the November elections makes passage nearly impossible. Even if the administration were to attempt regulatory action without Congress, legal challenges would almost certainly delay implementation.
Should I delay selling my home to wait for a bigger tax break?
No. The proposals are still in the discussion stage, with no clear path to passage and no timeline for implementation. If you need or want to sell, proceed under current law. Consult a tax professional if you expect your gain to exceed the current $250,000 or $500,000 exclusion limits to explore strategies for minimizing your tax liability.