President Donald Trump is considering an end to capital gains taxes on home sales
to boost the housing market, but experts note that homeowners can already lower
their tax bills through existing strategies.
Trump commented on the idea this week, stating in the Oval Office, “we’re
thinking about that.”
Currently, capital gains taxes apply to primary home sales when profits exceed
$250,000 for single filers or $500,000 for married couples filing jointly.
Profits above these thresholds are taxed at 0%, 15%, or 20%, depending on your
taxable income. Taxable income is determined by subtracting deductions from
adjusted gross income. Some higher earners may also face a 3.8% surcharge, known
as the net investment income tax, on these profits.
Who Pays Capital Gains Taxes on Home Sales
Despite rising home prices, most sellers do not exceed the current profit
thresholds.
William McBride, chief economist at the Tax Foundation, stated that those
affected are typically “older homeowners, people who have been in their house
for many, many years.”
A 2025 study from the National Association of Realtors indicates that
approximately 34% of homeowners filing as single could exceed the $250,000
profit limit, and 10% filing jointly could surpass the $500,000 limit. The
association has been advocating for capital gains reform for home sales.
For those anticipating profits above these levels, experts suggest several
methods to reduce their capital gains tax liability.
Reduce Your Home’s ‘Cost Basis’
Catherine Valega, a certified financial planner and enrolled agent based in the
Boston area, notes that many sellers are unaware they can lower capital gains
by increasing their “cost basis.” This basis represents the home’s original
purchase price.
Adding “capital improvements” that enhance a home’s resale value can increase
your basis.
Examples provided by the IRS include room additions, landscaping, or new system
installations.
However, the IRS clarifies that routine repairs and maintenance, such as
repainting or fixing leaks, do not qualify as capital improvements.
Valega advises keeping meticulous records of capital improvements, as this
documentation can significantly reduce tax obligations upon selling, regardless
of any future legislative changes.
