Mar 11, 2026
For many Americans, the biggest barrier to selling their home isn’t always finding a buyer — it’s the tax bill.
But that could change. According to a recent article by CNBC, lawmakers are weighing a proposal that could double the tax break for home sellers, potentially allowing married couples to keep up to $1 million in profit tax-free when they sell their primary residence (1).
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Supporters say the sweeping move could finally convince long-time homeowners to sell, opening up more homes and giving younger potential buyers a chance in a market that’s been getting further out of reach.
But not everyone is convinced.
The tax rule that hasn’t changed since the 90s
Under current U.S. tax law, homeowners can exclude some profits from capital gains taxes when selling their primary home. Right now, the limits according to the IRS are (2):
- $250,000 in profit for single filers
- $500,000 for married couples filing jointly
Those thresholds were set in 1997 and they haven’t budged since, even as home prices have surged across the country. It’s because of this that more sellers are bumping into the limit.
According to the National Association of Realtors, about 29 million homeowners, or 34%, could exceed the $250,000 exemption, while 8 million households, or 10%, could surpass the $500,000 cap for married couples (3).
Once profits exceed those thresholds, sellers can face capital gains taxes of up to 20%, plus an additional 3.8% tax for some higher-income households.
For homeowners who bought decades ago in hot markets, that tax hit can be enough to make them think twice about selling.
To address the issue, lawmakers introduced the More Homes on the Market Act, which would double the exclusion limits to (4):
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- $500,000 for individuals
- $1 million for married couples
The proposal would also adjust the limits for inflation going forward, in the hopes of preventing them from becoming outdated again.
According to CNBC, senators including Ted Cruz and Tim Scott have floated another idea: allowing homeowners to adjust their original purchase price for inflation before calculating capital gains.
Changes like these are meant to give homeowners a reason to sell by making it more profitable to cash in on their home’s value.
The debate comes at a time when the U.S. housing market is facing a severe shortage. Realtor.com estimates the country was short about 4.03 million homes in 2025, meaning there are millions fewer homes available than needed to meet demand (5).
Some believe that easing the tax burden could free up housing inventory that’s been locked away for years.
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Adam Michel, director of tax policy studies at the Cato Institute, shared in a blog post from January that, “Expanding or creating new exclusions for gains on home sales may free up some existing housing stock so that retirees can more easily downsize and younger couples can access the space they need to raise families.” (6)
But other experts argue taxes aren’t the main reason homeowners stay put.
A report from the Brookings Institution found that many older homeowners wouldn’t benefit much from the proposal, meaning it may do little to change their behavior.
“This is going to do next to nothing to solve the supply problem,” Howard Gleckman, a nonresident fellow at the Urban-Brookings Tax Policy Center, told CNBC (1), adding, “There are so many other reasons why older people don’t move from their homes.”
For many households, decisions about selling are driven more by lifestyle factors than tax considerations. They’re typically wanting to stay close to family or avoid the hassle of moving.
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Would a larger capital gains exclusion make selling worth it?
For homeowners potentially sitting on massive gains, the math could make a difference.
Imagine a couple who bought a home decades ago for $300,000 that’s now worth $1.5 million. After subtracting their original purchase price, they’d have a $1.2 million capital gain.
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Under current rules, married couples can exclude $500,000, leaving $700,000 potentially subject to capital gains tax. If that gain were taxed at the 20% federal long-term capital gains rate, the couple could owe about $140,000 in taxes. If the 3.8% net investment income tax also applied, the tax bill could climb to roughly $166,600.
But if the exclusion were raised to $1 million, only $200,000 of that gain would be taxable — potentially cutting the federal tax bill to around $40,000 to $47,600, depending on income. That difference could mean saving well over $100,000 in taxes for some homeowners.
It’s important to note that the tax break applies only to primary residences and not rental properties or vacation homes.
For many Americans, their home is their largest asset and doubling the capital gains tax break could give some homeowners a powerful push to sell. Whether it’s enough to make a meaningful difference to the housing shortage is still an open question.
For now, the idea remains a proposal rather than a pending law. While lawmakers and policy groups have discussed raising the capital gains exclusion, Congress has not yet passed legislation to change the current limits. That means homeowners considering a sale still need to plan around the existing $250,000 and $500,000 exclusions unless the law eventually changes.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
CNBC (1); IRS (2); National Association of Realtors (3); Congress.gov (4); Realtor.com (5); Liberty Taxed (6)
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A Dime Saved is a blog started by a self-described millennial mom on a tight budget. It's geared toward readers who want to have their finances in order so they can live the life they want to live.
