New research commissioned by the National Association of Realtors (NAR) shows current federal policy on capital gains taxes is steadily and quietly distorting the housing market, locking in older homeowners and limiting inventory. Under current tax law, homeowners can exclude up to $250,000 in capital gains from the sale of a primary residence, or up to $500,000 for married couples filing jointly. The caps have remained unchanged since they were set in 1997 even as the value of homes has steadily climbed. According to the NAR study, 34% of homeowners (29 million) could already have enough equity in their homes to exceed the $250,000 cap, and over 10% (8 million) could have enough to surpass the $500,000 threshold. Those numbers are projected to climb rapidly. The effect is a disincentive that housing economists are calling a “stay-put penalty.” NAR is supporting the More Homes on the Market Act, a bipartisan bill that would update the capital gains exclusion thresholds for the first time in nearly 30 years. The legislation would double the exclusion to $500,000 for individuals and $1 million for married couples, and adjust the caps to reflect future inflation. Support for the legislation was a key talking point for thousands of Realtors who recently went to Washington to meet with lawmakers. Read more at the NAR website.
Source: NAR; 6/9/2025