Could Proposed Tax Changes Help Unlock More Homes for Sale?
If you've been following the housing market over the past few years, you've probably noticed one consistent challenge: there simply aren't enough homes for sale.
While mortgage rates and affordability often make headlines, another factor quietly keeping inventory low is the capital gains tax homeowners may face when selling. Many longtime owners—especially those who have lived in their homes for decades—have built significant equity, making the potential tax bill a reason to stay put rather than sell.
Two proposed bills in Congress aim to address this issue by updating tax rules that many experts believe no longer reflect today's housing market.
Why Capital Gains Matter
When homeowners sell their primary residence, they may owe capital gains tax on profits that exceed the current federal exclusion:
Up to $250,000 for single filers
Up to $500,000 for married couples filing jointly
These limits were established in 1997 and have never been adjusted for inflation. Over the last three decades, home values have increased dramatically across much of the country—including here in Middle Tennessee.
For homeowners who purchased their homes many years ago, today's appreciation can easily exceed those thresholds, creating an unexpected tax burden that discourages selling.
The Proposed Changes
The More Homes on the Market Act (H.R. 1340)
This bipartisan proposal would permanently update the federal capital gains exclusion by:
Increasing the exclusion to $500,000 for single filers
Increasing it to $1 million for married couples filing jointly
Indexing those amounts for inflation moving forward
Supporters believe these changes would encourage more longtime homeowners to list their homes, creating additional inventory for today's buyers.
The Nest Egg Protection Act (H.R. 9064)
A second proposal focuses specifically on older homeowners who may want to downsize or "rightsize."
If passed, qualifying homeowners would be eligible for:
A $1 million capital gains exclusion
Available to homeowners 65 or older
Must have owned their primary residence for at least 25 years
Applies to qualifying home sales between 2027 and 2030
The goal is to help seniors retain more of the equity they've built while also making larger family homes available for the next generation of buyers.
What Could This Mean for Nashville?
While these bills have not become law, they highlight an important conversation about housing inventory.
In neighborhoods throughout the Nashville area, many homeowners have lived in their homes for decades. Some would like to downsize, move closer to family, or simplify their lifestyle—but potential tax implications can make that decision more difficult.
If policies like these were enacted, they could encourage more homeowners to make a move, potentially increasing the number of homes available for buyers and creating more opportunities across the market.
Thinking About Selling?
Every homeowner's situation is unique, and taxes are just one piece of the puzzle. If you've owned your home for many years, understanding your home's current value, your available equity, and the potential tax implications can help you make an informed decision.
Whether you're considering selling this year or simply planning for the future, our team is always happy to provide a personalized home value analysis and connect you with trusted tax professionals who can help you understand how current or future legislation may apply to your specific situation.
As always, we'll continue monitoring developments that could impact homeowners and keep you informed as new housing policies emerge.
