On July 10, Rep. Marjorie Taylor Greene (R-GA) unveiled a bill she is introducing into the House legislative program. If passed, the No Tax on Home Sales Act would eliminate federal capital gains tax (CGT) on the sale of primary residences.
Currently, you must pay CGT if your home increases in value by more than $250,000 ($500,000 for joint filers who are married) between purchase and sale, according to the IRS. However, this tax year, there is a zero applicable CGT rate for those earning up to $47,025 for single and married filing separately; $94,050 for married filing jointly and a qualifying surviving spouse; and $63,000 for head of household, says the IRS. See below for higher rates for those earning more.
Why Change Long-Standing IRS Rules?
“Families who work hard, build equity, and sell their homes should not be punished with massive tax bills,” said Greene in a press release.
“The capital gains tax on home sales is an outdated, unfair burden—especially in today’s housing market, where values have skyrocketed. My bill fixes that.”
And Greene's press release provided other possible benefits of her bill:
- Encourage mobility by removing a key disincentive to selling, helping to increase housing supply
- Deliver tax relief to homeowners looking to downsize or relocate without being penalized for appreciation
- Protect first-time buyers by improving inventory and lowering prices in the most constrained housing markets
Of course, relatively few Americans pay significant levels of CGT on selling their homes. But, for those who do, every little bit helps.
Will the Bill Pass?
It will be interesting to see how much support Greene will be able to muster for her bill. In theory, her Republican colleagues should be in favor of tax cuts. But all the states that would gain most from the measure tend to vote for the Democratic party.
According to Realtor.com, the states with the most homeowners liable for CGT are Hawaii (79.1%), Washington (64%), Massachusetts (62.3%), Utah (61.2%), and Colorado (59.5%). Those whom the bill would benefit least tend to vote Republican.
Conversely, Democratic legislators tend to be relaxed about collecting taxes from those they regard as relatively rich. So, Greene may face an uphill battle in getting her legislation to pass into law.
Capital Gains Tax Rates for Higher Earners
Those earning more than the zero-rate thresholds laid out above but less than $291,850 (single or married filing separately), $583,750 (married filing jointly or surviving spouse), or $551,350 (head of household) pay a 15% rate. However, a capital gains rate of 20% applies to the extent that your taxable income exceeds the thresholds set for the 15% capital gain rate. In rare circumstances involving an "unrecaptured section 1250 gain," the top CGT rate is 25%.
Note that we are simply citing the IRS's website. We are not qualified to provide taxation advice, and you should seek help from reputable professionals before relying on anything written here.
