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Trump’s Capital Gains Tax Cut Could Save Some Homeowners Tens of Thousands

Trump is weighing changes that could cut taxes on home-sale gains.

By Jordan Major , Edited by Becca Borawski Jenkins

Updated Sept. 8, 2026

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Homeowners who have watched their property values soar over the past several decades could eventually get a much bigger tax break when they sell if President Donald Trump backs changes now being discussed by his administration.

National Economic Council (NEC) Director Kevin Hassett said in August that the administration is looking at home-sale capital gains taxes, while former NEC Director Larry Kudlow said Trump was interested in both a larger home-sale exclusion and indexing capital gains for inflation.

People who bought decades ago and have seen their homes rise sharply in value could be most affected by any change. Taxes on a large gain are often what many homeowners overlook when deciding whether to sell or downsize.

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How home-sale capital gains are taxed today

Current law already provides a substantial tax break when you sell your primary residence. Homeowners who meet the requirements may generally exclude up to $250,000 of gain from federal taxable income, or up to $500,000 for married couples filing jointly.

To qualify, the property generally must have been owned and used as the taxpayer's principal residence for at least two of the five years before the sale.

The exclusion applies to the profit, not the home's selling price. Gain is broadly calculated by comparing the amount realized from the sale with the home's adjusted basis, which generally starts with the purchase price and could be increased by certain qualifying improvements. Anything above the exclusion may be subject to long-term capital gains tax.

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Why the current tax break is falling behind

One reason lawmakers are revisiting the exclusion is that the $250,000 and $500,000 limits have remained unchanged since 1997 and aren't automatically adjusted for inflation.

As a result, rising home values mean more longtime owners could potentially find themselves with gains exceeding the decades-old limits, particularly in areas where property values have climbed dramatically. NAR estimates that roughly 13.1 million homeowners, or 15% of owner-occupied households, could exclude today's exclusion if they sold.

Trump is considering a larger tax break

Hassett said in August that the administration is examining the capital gains treatment of home sales after discussing polling showing that 62% of voters supported indexing capital gains for inflation.

A bipartisan bill already before Congress, the More Homes on the Market Act, would double the exclusion to $500,000 for individuals and $1 million for qualifying married couples filing jointly, while adjusting those amounts for inflation going forward.

Former NEC Director Larry Kudlow has suggested Trump is interested in both ideas. "I spoke to him; he liked the idea of the indexing, he liked the idea of a bigger exemption," Kudlow said.

Kudlow argued that the issue could be especially relevant to empty nesters and other longtime owners who have held the same property for 30 or 40 years. The administration has not formally adopted either approach, however.

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A bigger exclusion could save tens of thousands

Trump hasn't released a specific proposal, so the bipartisan More Homes on the Market Act offers a useful illustration of the potential savings.

Consider a married couple who qualifies for today's $500,000 exclusion and realizes a $600,000 gain. That would leave $100,000 potentially taxable, resulting in about $15,000 in federal capital gains tax if the taxable gain were subject to the 15% long-term capital gains rate. A $1 million exclusion could eliminate that taxable gain.

As the gain rises, so does the potential savings. A $750,000 gain would leave $250,000 potentially taxable today, or about $37,500 in tax at the same rate. With a $1 million gain, $500,000 could remain taxable, producing a bill of roughly $75,000.

Under a $1 million exclusion, all three examples could potentially result in no taxable gain from the home sale.

Longtime homeowners could benefit the most

Not every home seller would benefit. Someone whose gain already falls below the existing $250,000 or $500,000 exclusion could generally exclude the entire amount if they meet the requirements, so raising the limits wouldn't reduce their federal capital gains tax further.

The biggest savings would instead go to people whose gains exceed today's thresholds, including those who bought decades ago in markets where home values have risen dramatically. Empty nesters considering downsizing could be particularly affected.

However, the policy wouldn't benefit homeowners evenly. The largest dollar savings would generally go to owners whose gains exceed today's exclusion limits by the greatest amounts.

Don't change your selling plans yet

Despite the attention surrounding Hassett's comments, homeowners shouldn't calculate an expected tax windfall into their plans yet.

The White House hasn't formally proposed a change, and Trump hasn't announced specific thresholds or a timeline. White House spokesman Kush Desai said Trump is "always exploring new ideas," while adding that official policy announcements would come directly from the administration. Any increase to the statutory exclusion would also generally require congressional action.

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Bottom line

A larger home-sale exclusion could make a meaningful difference for people who bought decades ago and are now sitting on gains above today's $250,000 and $500,000 limits. Depending on the eventual proposal, the federal tax savings could reach tens of thousands of dollars.

Nothing has changed yet, though. Homeowners considering a sale should avoid surprising financial mistakes, including assuming a larger exclusion is coming before Trump releases a formal proposal or Congress changes the law.

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