Trump will consider eliminating capital gains taxes to boost housing market

President Trump on Tuesday told the press he is considering legislation that would eliminate capital gains taxes on primary residences.

“We’re thinking about that,” Trump said Tuesday. “But would also unleash it just by lowering the interest rates. If the Fed would lower the rates, we wouldn’t even have to do that. But we are thinking about no tax on capital gains on houses.”

The legislation, proposed by Georgia Republican Congresswoman Marjorie Taylor Greene, would entirely eliminate capital gains on primary residences.

The capital gains tax is a federal levy triggered when someone sells an asset, such as a home, personal property or investment securities, “for more than [a seller’s] adjusted basis,” which the IRS defines as the original purchase price of the item.

The IRS currently allows an exclusion of up to $250,000 ($500,000 for joint filers) in capital gains from home sales. These limits haven’t been updated since 1997, when the median U.S. home price was $145,000. Today, that figure has climbed to $360,239.

According to a recent National Association of Realtors study, over 8 million homeowners exceed the $500,000 cap. By 2030, eight states would have more than 40% of homeowners with equity over the $500,000 cap and by 2035, that number would increase to 20 states, the study claimed.

In all, NAR says 29 million homeowners today (34%) could face capital gains taxes if they sold (have equity over the $250,000 exclusion cap). The trade group projects that number to climb to 70% (59M) in 10 years.

Greene’s office said her bill would “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 [and] protect first-time buyers by improving inventory and lowering prices in the most constrained housing markets.”

Republicans threw homeowners in wealthier areas a bone this year when they passed the tax bill this year including an increased cap on state and local taxes (SALT) to $40,000, up from $10,000.