New Bill Could Let Senior Homeowners Keep Up to $1 Million Tax-Free When Selling

If you're a longtime homeowner thinking about downsizing, a new bill in Congress could mean significant tax savings, and let's just say it's worth knowing about.

Rep. Nicole Malliotakis (R-NY) has introduced a House bill that would temporarily raise the federal capital gains tax exclusion to $1 million for homeowners ages 65 and older who have owned their primary residence for a minimum of 25 years. The legislation, known as H.R. 9064, or the "Nest Egg Protection Act," was introduced June 1.

Why this matters

Under current law, individuals may exclude up to $250,000 in capital gains from federal taxes on the sale of their primary residence, while joint filers may exclude up to $500,000, exclusion amounts that have not been increased since 1997. Anything above those thresholds gets taxed, and after decades of rising home values, many longtime owners now face hefty tax bills simply for selling the home they've lived in for years.

What the bill would do

If passed, eligible seniors could exclude up to $1 million in gains from taxation, essentially doubling the current exclusion. The expanded exemption would apply only to homeowners who have owned their property for at least 25 years, and the enhanced exclusion would apply from tax years 2027 to 2030 if enacted.

The bigger picture for the housing market

Supporters argue this isn't just about helping sellers; it's about loosening up inventory. The proposal targets seniors in high-cost markets who face large tax bills when selling, aiming to protect their equity and encourage more listings, which could boost inventory for first-time and move-up buyers.

As the bill's sponsor put it, "By removing this tax barrier that discourages seniors from selling when they want to, we can protect their nest egg while making the American Dream of homeownership more attainable for younger families and first-time homebuyers."

Worth watching

This isn't the only proposal addressing this issue. Malliotakis is also a co-sponsor of H.R. 1340, the More Homes on the Market Act, which would double the current home sale capital gains exclusion to $500,000 for individuals and $1 million for married couples while indexing these amounts to inflation.

For seniors weighing a move, whether to be closer to family, downsize, or transition to a senior living community, proposals like this are a reminder that the tax landscape around selling a longtime home may be shifting. As always, talk with a tax professional about your specific situation, and feel free to reach out if you'd like to talk through your options. If you are thinking about selling your home, reach out to us, and we can connect you to a trusted real estate agent who understands your needs and can provide you with more information on your home's value and lay out the process for selling.

Sources: Kiplinger, Newsweek, HousingWire, and a press release from Rep. Malliotakis' office.