New bill would eliminate federal tax on home sales – The Time Machine

New bill would eliminate federal tax on home sales

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Real estate owners looking to sell their homes in the future may be able to avoid paying the federal capital gains tax if newly-introduced legislation passes.

The No Tax on Home Sales Act, introduced Thursday by U.S. Rep. Majorie Taylor Greene, R-Ga., would eliminate the federal capital gains tax on home sales if the home is the seller’s primary residence. This caveat would ensure that house flippers or real estate investors would not take advantage of the change.

Currently, if homeowners sell their property for more than they originally paid for it, the difference is called a capital gain. The federal government will usually tax the gain, depending on the home seller’s income, gain amount, and how long the home was owned. The capital gains tax falls into 0%, 15%, and 20% brackets.

Greene said her bill, by removing what amounts to a tax penalty on home selling, would increase housing market fluidity as well as housing inventory.

“Families who work hard, build equity, and sell their homes should not be punished with massive tax bills,” Greene said in a statement. “The capital gains tax on home sales is an outdated, unfair burden – especially in today’s housing market, where values have skyrocketed.”

The Internal Revenue Service does allow some homeowners to exclude gains up to $250,000 for qualifying single filers and $500,000 for joint filers. But that rule has not been updated since 1997, and housing prices have risen 119% since then, subjecting more and more Americans to a tax originally meant for the wealthy.

“Homeowners who have lived in their homes for decades, especially seniors in places where values have surged, shouldn’t be forced to stay put because of an IRS penalty,” Greene added. “My bill unlocks that equity, helps fix the housing shortage, and supports long-term financial security for American families.”

If the bill passes, the federal government would see a significant decrease in revenue. While the number of capital gains tax filers fluctuates from year to year, 26 million tax returns included some capital gains in 2019, amounting to billions of dollars in taxes.

The federal government is already set to lose at least $3.3 trillion in projected tax dollars over the next 10 years due to the passage of Republicans’ “big, beautiful bill,” which makes the bulk of the 2017 tax cuts permanent.