Outdated 1997 capital gains rule is squeezing home sellers, lawmakers propose fix

The housing market’s slowdown is being linked not only to high mortgage rates but also to a capital-gains tax rule written in 1997 that leaves the exclusion amount unchanged at $250,000 for single filers and $500,000 for married couples. Because the median home price has climbed from $139,000 in 2000 to $417,700 today, homeowners effectively face higher taxes on built-up equity. Lawmakers have introduced the More Homes On The Market Act, a bipartisan effort led by Republicans, to raise the exemption to $500,000 for individuals and $1 million for couples and to automatically adjust those limits for inflation thereafter.

The bill is co-sponsored by 17 Republican senators and is presented as a free-market solution that could unlock stalled inventory and address fairness concerns for long-time owners. Recent data from Redfin show home sales and listings at their lowest in nearly two years, underscoring the urgency of the proposal. Proponents argue that, unlike interest rates, Congress can directly remedy this tax issue, which they view as a self-inflicted problem. The initiative is being framed as both an economic and political opportunity ahead of upcoming midterm elections.