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Legislative bills

Bipartisan Legislation Aims to Address Housing Affordability by Increasing Tax Exclusion on Home Sales

Strategic Insights

— 2 min read

Congressman Jimmy Panetta (CA-19) and Representative Mike Kelly (PA-16) reintroduced the bipartisan More Homes on the Market Act to address ongoing housing affordability issues across the country. The legislation aims to amend the tax code to incentivize more homeowners to sell their houses and increase the market supply. Currently, homeowners who sell their home can only exclude $250,000 in gains from capital gains taxes, or $500,000 in the case of a joint-filing couple, an amount set in 1997 and not indexed for inflation. This has had an outsized impact on California homeowners who face some of the highest housing costs in the nation.

Key Takeaways:

  • The More Homes on the Market Act would increase the sales gain tax exclusion to $500,000 for single filers and $1 million for joint filers, a significant increase from the current exclusion of $250,000 for single filers and $500,000 for joint filers.
  • The bill would amend the tax code to incentivize more homeowners to sell their houses and increase the market supply, helping to alleviate housing shortages and affordability issues.
  • The current tax exclusion amount was last updated in 1997 and has not been indexed for inflation, resulting in a significant decrease in its value over time.
  • The legislation would ensure that homeowners can keep more of their investment when selling their homes, making it easier for them to downsize or sell their homes.
  • The bill has the support of the National Association of REALTORS (NAR) and the California Association of Realtors (C.A.R.), who see it as a necessary step to address the tax burden on homeowners.
  • The More Homes on the Market Act would not only benefit homeowners but also younger homebuyers who are facing a severe shortage of available homes in the U.S.

Statistics:

  • The current tax exclusion amount for single filers is $250,000, which would increase to $500,000 under the More Homes on the Market Act.
  • The current tax exclusion amount for joint filers is $500,000, which would increase to $1 million under the legislation.
  • If the tax exclusion amount had been indexed for inflation since 1997, it would be $461,325 for single filers and $922,650 for joint filers today.

Sources:

  • "More Homes on the Market Act" press release by U.S. Representative Jimmy Panetta
  • Statement by Kenny Parcell, 2023 President, National Association of REALTORS (NAR)
  • Statement by C.A.R. President Jennifer Branchini, a Bay Area real estate agent and REALTOR

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