Trump home sale capital gains tax idea remains only a discussion

Talk of a Trump home sale capital gains tax cut is back in focus after White House economic officials discussed possible tax breaks ahead of the midterm elections. For homeowners considering a sale, the immediate takeaway is more mundane: no tax rule has changed, and any expansion of the current exclusion would need Congress to act.

National Economic Council Director Kevin Hassett and Larry Kudlow, who held the same role in Trump’s first term, discussed potential tax proposals during a Fox Business appearance, CNBC reported. Kudlow said he had spoken with President Donald Trump about indexing capital gains for inflation and changing the home-sale rules to protect more profit from tax, adding that Trump was interested in the ideas.

White House spokesman Kush Desai told CNBC that the president considers new ideas but that any policy announcement would come directly from the administration. The discussion does not amount to a formal administration proposal.

How would a Trump home sale capital gains tax cut affect homeowners?

Under current law, a home seller generally calculates gain by comparing the sale price with the property’s adjusted basis, which reflects the original cost and certain adjustments. Qualifying sellers of a primary residence can exclude up to $250,000 of gain when filing singly, or up to $500,000 when married and filing jointly, according to CNBC and the Congressional Research Service.

Any gain above those limits can face long-term capital-gains tax rates of 0%, 15% or 20%, depending on taxable income. Eligibility requirements and basis calculations still apply, so homeowners should not assume a pending or future sale is tax-free.

The practical effect would depend on the policy Congress chose. A larger exclusion would matter only for sellers with gains above today’s $250,000 or $500,000 limits. Eliminating the cap would exempt that group’s gains more fully. The Congressional Research Service says the limits were set in 1997 and were not designed to rise automatically with home prices.

What Congress has considered

Two bills already in Congress outline different routes. The More Homes on the Market Act, H.R. 1340, would double the exclusions and adjust them annually for inflation. The No Tax on Home Sales Act, H.R. 4327, would remove capital-gains tax on primary-residence sales. Both remained in committee, CNBC reported.

Jude Boudreaux, a certified financial planner at The Planning Center, told CNBC that a tax-law change before the midterms was “extremely unlikely” given the limited time and the challenge of passing legislation. That is an assessment, not a confirmed timetable.

Who is most likely to benefit?

Yale Budget Lab’s analysis of the Federal Reserve’s 2022 Survey of Consumer Finances found that 10.3% of homeowner households had gains above the current exclusion thresholds. That group had average net worth of $5.707 million, average income of $431,000 and an average age of 64.7, Yale reported. The group below the thresholds accounted for 89.7% of homeowner households.

Yale said later home-price appreciation could mean a somewhat larger share now exceeds the limits. Separately, the National Association of Realtors estimated that 15% of current homeowners could face the tax if they sold, CNBC reported. The figures use different timing and methods.

Housing-market effects remain unsettled. NAR chief economist Lawrence Yun said a higher exclusion could encourage some affected owners to list. Redfin chief economist Daryl Fairweather said it was unclear a cut would help the market and suggested some owners could instead stay longer.

This story draws on original reporting from CNBC.