"We're thinking about no tax on capital gains on houses.” - Trump

Last updated: August 14, 2025

“We are thinking about no tax on capital gains on houses.” - Trump

If this becomes reality, what does it mean for real estate investors, housing markets, home prices and inventory?

Capital gains on home sale

First, let's provide some context into current tax law:

What is the current federal capital gains tax on the sale of a primary residence?

If you sell your primary residence, you can exclude up to $250,000 of the gain from your income if you're a single filer, and up to $500,000 if you're married filing jointly. This exclusion applies if you've owned and lived in the home as your main residence for at least two of the five years before the sale. Any gain above the exclusion amount is taxed at long-term capital gains rates of 0%, 15%, or 20%, depending on your income.

What is the current federal capital gains tax on the sale of a rental property?

When selling a rental property held for more than a year, the profit is subject to two types of federal tax. First, the portion of the gain from depreciation you've claimed over the years is taxed at a maximum rate of 25% (depreciation recapture). Any remaining profit is treated as a long-term capital gain and is taxed at 0%, 15%, or 20%, depending on your overall taxable income. If held for a year or less, the entire gain is taxed as ordinary income.

What is the current federal capital gains tax on the sale of a fix and flip property?

When selling a fix-and-flip property, the profit is typically taxed as a short-term capital gain, assuming you hold the property for one year or less. These gains are not subject to preferential capital gains rates. Instead, they are taxed at your ordinary federal income tax rates, which depend on your total taxable income and filing status. For 2025, these rates can range from 10% to 37%.

What has been proposed?

Marjorie Taylor Greene (R-GA) introduced the No Tax on Home Sales Act which aims to eliminate federal capital gains taxes on the sale of primary residences.

What is likely to happen to for sale housing inventory count?

Inventory of higher-priced homes would likely increase. Homeowners with large capital gains exceeding the current exemption—often older, long-time residents—are currently "locked-in" by the tax penalty. Removing the tax would incentivize them to sell and downsize or move, increasing the number of homes on the market, particularly at the higher end.

What is likely to happen to home prices?

Home prices would likely face downward pressure. An increase in for-sale inventory, prompted by long-time owners deciding to sell, would boost supply. This added supply, especially in high-cost areas, would likely moderate price growth or potentially cause modest price drops for more expensive homes.

How does this apply to rental property investors and flippers?

Unless Trump provides a huge win for real estate investors, it's unlikely this proposed law would apply to non-primary residence sales.

Tax law distinguishes between a primary residence and an investment property. The current exclusion applies only to a primary residence. Any new proposal would almost certainly maintain this distinction, meaning rental property and fix and flip sales would still be subject to standard capital gains taxes.

Since this would unlock higher value properties, it is less likely to create buying opportunities for most investors as older sellers downsize to smaller, lower-value properties. Investors focused on the high end of the market may find attractive on-market opportunities.

Who will benefit from this?

The most direct beneficiaries would be long-term homeowners, typically in high-cost coastal areas, whose profits from selling their homes exceed the current $250,000 or $500,000 exemptions. These are generally wealthier households. Real estate professionals (i.e. real estate agents, title, appraisers, consumer lenders, contractors) would also benefit from increased sales activity.

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