An unchanged capital gains rule since 1997 creates a hidden home-equity tax on primary residence sales. About one-third of current sellers risk owing capital gains tax on home equity, with that share expected to exceed half by 2030. Retirees and longtime owners face disproportionate exposure because inflation generates "phantom gains" that can trigger taxable profits despite real purchasing-power losses. Policy responses include proposals to eliminate capital gains on primary homes, to double and index exemption limits for inflation, and to index gains so only real appreciation is taxed, aiming to protect homeowners without large budgetary effects.
The tax rule governing capital gains on home sales, which has remained unchanged since 1997, is causing a hidden home equity tax for millions of homeowners. Approximately 1 in 3 sellers currently faces the risk of paying capital gains tax on their home equity, a number expected to rise to over half of homeowners by 2030. The issue disproportionately affects retirees and longtime owners who may incur substantial tax bills due to "phantom gains" resulting from inflation.
U.S. Rep. Marjorie Taylor Greene has proposed the No Tax on Home Sales Act to eliminate capital gains taxes entirely for primary residence sales, an idea supported by President Donald Trump. The bipartisan More Homes on the Market Act seeks to double the exemption limits and index them for inflation, aiming to incentivize homeownership without significantly affecting the federal budget. Policy groups advocate for indexing gains to inflation to tax only real appreciation, addressing the issue of homeowners facing taxes on gains inf
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