Trump Considers Ending Capital Gains Tax on Home Sales
President Donald Trump is exploring the possibility of eliminating capital gains taxes on home sales to help boost the housing market. Experts believe this could reduce tax bills without needing new legislation.
In a recent Oval Office briefing, Trump remarked to reporters, “We’re thinking about it.”
Currently, the Capital Gains Tax applies if you earn more than $250,000 as a single filer or $500,000 for a married couple when selling your home.
Under existing law, profits exceeding these thresholds are taxed at rates of 0%, 15%, or 20%, depending on your taxable income, which is determined by deducting standard or itemized expenses from your total revenue.
Additionally, some high-income individuals face a 3.8% tax, known as the net investment income tax, on profits that surpass these limits.
Who Faces Capital Gains Taxes?
Despite significant increases in home prices in the last few decades, experts note that many sellers do not exceed the profit limits. William McBride, Chief Economist at the Tax Foundation, expressed optimism, stating, “We’re looking forward to seeing you in the future.”
Research indicates around 34% of homeowners might surpass the $250,000 threshold for singles, while about 10% of couples may reach the $500,000 mark. This data comes from the National Association of Realtors’ Capital Gain Reform report.
If you’re planning to sell your home and expect to make a profit above these limits, experts suggest various strategies to minimize your capital gains taxes.
Ways to Reduce Your Home’s Cost Base
Catherine Valega, a certified financial planner and founder of Green Bee Advisory in the Boston area, highlights that many sellers aren’t aware they can lower their capital gains by adjusting the “cost base”—essentially, the original purchase price of the home.
You can increase this base by making “capital improvements” that add value to your home, according to her. Examples include adding rooms, landscaping, or upgrading systems, as noted by the IRS.
On the flip side, regular repairs and maintenance—like fixing leaks or replacing worn hardware—do not count as capital improvements.
Regardless of any potential changes in law, keeping records of these capital improvements is essential for homeowners.
