Possible Changes to

The “No Tax on Home Sales Act,” recently introduced in Congress by Representative Marjorie Taylor Greene, has the real-estate world on alert—for good reason. If passed, it could reshape the housing landscape, particularly in high-cost states like California.

Currently, homeowners who sell their primary residence can exclude up to $250,000 in capital gains if filing as a single individual, or up to $500,000 if married. While these thresholds once covered most sales, home values in many areas have far outpaced them, leaving some longtime owners facing thousands of dollars in tax liability when they sell.

In Los Gatos, for example, a home purchased for $300,000 in 2000 may now be worth $1 million. That’s a $700,000 increase in value, and under today’s rules, at least $200,000 of that could be subject to capital-gains tax. For older homeowners looking to downsize, relocate, or simply cash out their equity, this tax burden can be a serious barrier to making a move.

It’s not just about taxes. It’s about inventory. The real-estate industry has long argued that outdated capital-gains exclusions are keeping high-equity homeowners “stuck” in homes they no longer want or need. In tight markets like California, where demand outpaces supply, freeing up this housing stock could add much-needed inventory. But the implications are broader: unlocking these homes could also increase mobility, reduce reliance on home-equity loans, and help retirees transition more easily.

According to Cotality, nearly 30 percent of California home sales in recent years exceeded the $500,000 capital-gains threshold, compared to less than five percent in 18 other states. The National Association of Realtors estimates about 10 percent of homeowners across the U.S. are affected. That number is rising in step with home values.

The bigger question may be: is it time to modernize the tax code? The $500,000 capital- gains exclusion for married couples hasn’t changed since 1997. If it had been indexed to inflation, it would be over $1.13 million today.

Whether the exemption is eliminated or simply raised, change seems inevitable. And with it, we could witness a dramatic shift. Older homeowners might sell long-held properties, empty nesters could downsize without undue tax burdens, and more inventory could become available in a market that desperately needs it.

If the bill gains traction, California and similar states could experience a wave of listings from longtime homeowners who’ve been waiting for the right moment to move. For professionals and policymakers alike, understanding these trends will be crucial in preparing for what could be a major reshuffling of the housing market.

This could be a game changer, especially for retirees. Keith Kanady is a licensed real-estate broker with Compass