Former President Donald Trump is backing a new plan that could change how millions of Americans sell their homes. The proposal, called the No Tax on Home Sales Act, would completely remove federal capital gains taxes on profits from selling a primary residence. If it goes through, homeowners would no longer have to worry about tax bills when cashing out their equity, no matter how much profit they make or how long they lived in the property.
How the Current Tax Rules Work
Right now, the law lets single homeowners avoid taxes on up to $250,000 in profit when selling their main home. Married couples filing jointly can avoid taxes on up to $500,000. Anything above that is taxed at 15% to 20%. On top of that, the seller must have lived in the home for at least two of the past five years to qualify. These rules were set back in 1997. At that time, home values were much lower, and far fewer people hit the limit. With home prices soaring over the last two decades, many Americans are now paying taxes that the system was never designed to capture.
Why More Homeowners Are Getting Taxed
According to the National Association of Realtors (NAR), about 34% of single homeowners and 10% of married couples now owe capital gains tax when they sell their homes. That translates to almost 29 million single owners and 8 million couples numbers that show how outdated the current caps have become. In some markets, home prices have more than tripled since 1997, pushing even middle-class families into taxable territory.
Who Would Benefit Most
The biggest winners from this change would be long-term homeowners in expensive states like California, New York, and Massachusetts. Seniors who have delayed downsizing because of tax worries could finally move without losing a large chunk of their nest egg. Military families and workers who relocate often would also benefit, since the proposal scraps the two-year residency rule. Right now, if you move too soon after buying, you risk losing the exclusion even if the home was your main residence.
The Debate Over Costs and Risks
Supporters say the plan would unlock housing supply by encouraging more people to sell. That could help younger buyers struggling with low inventory. They also argue it’s unfair to tax ordinary families on what is often their biggest asset. But critics warn that it could blow a hole in the federal budget. Adjusting the current caps for inflation alone is expected to cost nearly $19 billion over the next decade. Eliminating the tax entirely would be far more expensive. Some economists also worry that wealthy homeowners would gain the most, while investors could game the system by claiming second homes as primary residences.
What Happens Next
The bill is still in its early stages in Congress. Lawmakers may try to compromise by raising the current caps or tying them to inflation, instead of removing the tax completely. Trump’s backing has given the idea momentum, but the final outcome will depend on debates over fairness, cost, and housing market stability. For now, homeowners are waiting to see if this could mark the end of capital gains taxes on home sales or just the start of another long tax fight in Washington.