The No Tax on Home Sales Act: Could This Unlock Trillions in Frozen Housing Inventory?

29 million homeowners are trapped by an outdated tax rule. A new bill could set them free — and reshape the housing market.

Here's a stat that should stop every homeowner in their tracks: 34% of American homeowners — roughly 29 million people — would owe capital gains taxes if they sold their homes today.

Not because they're wealthy. Not because they're flipping. Simply because they bought a house, lived in it, and watched it appreciate in a market that's tripled since the tax rules were written.

The result? Millions of homeowners are sitting on the sidelines, refusing to sell, locking up inventory that first-time buyers desperately need.

Now, a new bill — backed by President Trump — wants to eliminate that tax entirely.

If it passes, we could see the largest inventory unlock in decades. Here's what you need to know.

The Problem: America's “Stay-Put Penalty”

The current capital gains exclusion for home sales was set in 1997. Back then, Congress allowed homeowners to exclude up to $250,000 in gains ($500,000 for married couples) when selling a primary residence.

That threshold hasn't budged in 28 years.

Meanwhile, the median home price has nearly tripled — up roughly 190%. In hot markets like California, Florida, and the Northeast, appreciation has been even more dramatic.

The math has created what the National Association of Realtors calls a “stay-put penalty.” According to NAR research:

• 34% of homeowners now exceed the $250,000 threshold
• 10% (8 million Americans) exceed the $500,000 married threshold
• In California, 63% of homes have gained more than $250,000

The practical effect? Seniors who might otherwise downsize are staying in four-bedroom homes they no longer need. Empty nesters who'd love to relocate closer to family are staying put. And entry-level inventory stays locked up, inaccessible to buyers who need it most.

“The current federal policy on capital gains tax on home sales is quietly distorting the housing market,” NAR researchers wrote, “by locking in older homeowners, and strangling inventory just when America needs it most.”

What's Actually Proposed

In July 2025, Rep. Marjorie Taylor Greene (R-GA) introduced H.R. 4327: the No Tax on Home Sales Act.

The bill is straightforward: eliminate the cap on capital gains exclusions for primary residence sales entirely.

Key provisions:

• Only applies to primary homes. Investment properties, second homes, and flips are explicitly excluded.
• Not retroactive. The changes would apply to sales occurring after enactment.
• The 2-out-of-5-year residency rule remains. You still need to have lived in the home for at least two of the past five years to qualify.

Trump publicly endorsed the concept in an Oval Office press briefing: “We are thinking about no tax on capital gains on houses.”

The National Association of Realtors is lobbying hard for passage. With endorsements building, momentum is growing.

Who Actually Benefits

Let's be clear about who wins here — and who doesn't.

The primary beneficiaries are long-term homeowners in high-appreciation markets. California is the most dramatic example: 63% of Golden State homes have gained more than $250,000 since they were last sold. That's the highest share of any state.

Yale's Budget Lab estimates the average benefit per qualifying seller would be approximately $100,000.

But here's the nuance critics point out: 90% of home sales already generate less than $500,000 in gains. For married couples, that means the vast majority of sellers already owe nothing under current law.

The real beneficiaries are older homeowners who've held property for decades in metros where prices have exploded. Think: someone who bought in San Francisco in 1995, or Miami in 2005.

The demographic profile of winners skews older, wealthier, and disproportionately concentrated in coastal markets.

Why This Could Unlock Housing Inventory

Even if you're not planning to sell soon, this bill could reshape the market.

Inventory release is the big story. If seniors currently sitting on $800,000 in gains can finally sell without a six-figure tax bill, they might actually list. That could flood the market with the mid-tier and entry-level homes that have been locked up for years.

Redfin Chief Economist Daryl Fairweather put it directly: “With the financial barrier removed, more may decide to sell and either downsize or relocate, potentially freeing up housing inventory and putting downward pressure on home prices.”

More inventory means more opportunities. Transaction velocity increases. Motivated sellers emerge. The current dynamic — where sellers refuse to list because they'd rather stay put than pay capital gains — shifts.

Price stabilization or decline is possible. In the hottest markets, an inventory surge could finally cool things off. That's good for buyers who've been priced out.

The Reality Check: Why This Might Not Pass

Political reality check: this bill faces serious headwinds.

Deficit Politics

The One Big Beautiful Bill Act already added trillions to the deficit. Congressional appetite for additional tax cuts — especially ones that benefit homeowners who are already sitting on significant wealth — is uncertain.

Distributional Concerns

Critics argue this proposal benefits people who are already doing well while offering nothing to renters. Meanwhile, if the inventory release actually boosts demand, renters could face even higher prices in the markets they're trying to buy into.

Revenue Loss

Eliminating the cap costs billions annually. That money has to come from somewhere — or add to the deficit.

Political Uncertainty

Some analysts are skeptical this moves forward. One industry observer quoted by U.S. News put it bluntly: “I think it's a long shot.”

Even Trump's endorsement was conditional. “If the Fed would lower the rates, we wouldn't even have to do that,” he said, suggesting this might be more of a negotiating position than a firm policy priority.

What This Means for Homeowners

If you're sitting on significant gains, here's what to consider:

Calculate Your Potential Tax Bill

Figure out if you'd owe taxes under current law:

1. Estimate your home's current market value
2. Subtract your original purchase price
3. Subtract the cost of major improvements (kitchen remodel, addition, etc.)
4. If the net gain exceeds $250,000 (single) or $500,000 (married), you'd owe taxes

Example:

• Purchased in 2000 for $200,000
• Current value: $850,000
• Capital improvements: $50,000
• Taxable gain: $600,000 (exceeds $500,000 married threshold by $100,000)
• Tax owed (20% long-term capital gains rate): $20,000

If this bill passes, that $20,000 tax bill disappears.

Don't Rush to Sell Based on Speculation

This bill hasn't passed. Don't make major life decisions based on proposed legislation. If you need to sell, sell. If you're on the fence, wait to see if this actually becomes law.

Property Taxes Still Matter

Even if capital gains taxes go away, you're still paying property taxes every year. If your home's assessed value is higher than it should be, you're overpaying — whether you sell or not.

Most homeowners never challenge their property assessment. But 30-60% of properties are over-assessed. If your home's value jumped significantly, your property taxes probably did too. Make sure you're not overpaying.

What This Means for Investment Property Owners

Here's what landlords and real estate investors need to understand:

This Bill Does NOT Help Investment Properties

The No Tax on Home Sales Act applies exclusively to primary residences. If you're holding rentals, flipping properties, or operating as a real estate professional, nothing changes for you. Investment properties remain subject to full capital gains plus depreciation recapture.

1031 Exchanges Remain Essential

For investment property, the like-kind exchange is still your primary tool for deferring capital gains. This bill doesn't touch 1031 exchanges — and that's actually good news, because Congress has repeatedly floated eliminating or limiting them.

Primary Residence Conversion Strategy Becomes More Valuable

If you hold rental property, converting it to a primary residence — and living in it for two of five years — has always been a legitimate tax strategy. If the exclusion cap is eliminated, that strategy becomes even more powerful for properties with massive appreciation.

Estate Planning Considerations

The stepped-up basis at death still exists under current law. But if capital gains on primary residence sales are eliminated, some estate planning strategies — like deliberately holding property until death to capture the step-up — become less relevant.

What to Watch

If you're tracking this bill, here's what matters:

Congressional Calendar

For this to pass, it likely needs to be attached to a larger reconciliation package or tax bill. Watch for movement on tax legislation in Q2 and Q3 2026.

NAR Lobbying Pressure

The real estate industry is all-in on this. With 1.5 million members and significant political influence, NAR can move the needle.

Trump's Prioritization

Is this a serious policy push or a talking point? Watch for whether it shows up in budget proposals or major speeches.

Effective Date

If this passes, the effective date matters enormously for tax planning. Sellers considering listing in late 2026 should track the timeline closely.

The Bottom Line

The No Tax on Home Sales Act is a “maybe” bill with real implications if it passes.

For homeowners sitting on big gains: This could eliminate a massive tax bill and give you the freedom to sell, downsize, or relocate without penalty.

For first-time buyers: More inventory could mean more options and potentially lower prices in hot markets.

For landlords and investors: This doesn't help you directly, but it could reshape inventory dynamics in markets you operate in.

For everyone: Capital gains policy is in play in 2026 in ways it hasn't been in decades. The rules you're planning around today might not be the rules next year.

Watch this space. And in the meantime, make sure you're not overpaying on your property taxes while you wait to see if this bill passes.

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