Today, Rep. Jimmy Panetta (D-CA-20) and Rep. Mike Kelly (R-PA-16) introduced the More Homes on the Market Act, which would amend the tax code to incentivize more homeowners to sell their houses and increase the market supply. The More Homes on the Market Act ensures that homeowners can keep more of their nest egg when selling their homes by increasing the sales gain tax exclusion to $500,000 for single filers and $1 million for joint filers. 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.
"Due to outdated limitations on home sale gain exclusions, homeowners who are looking to downsize are discouraged from selling their homes, which can stifle our real estate market and contribute to a lack of housing supply," said Rep. Jimmy Panetta. "Increasing this exclusion through the bipartisan More Homes on the Market Act will make it easier for homeowners to earn more from their investment, which will incentivize them to sell and increase the amount of homes on the market. Although the affordable housing problem in the Bay Area and Central Coast is complicated, this legislation can help by providing a straightforward solution of amending the tax code to meet modern inflationary pressures."
"As housing prices have increased, people who have chosen to downsize have been unfairly punished with massive tax burdens," Rep. Kelly said. "After years of making improvements and investments into their homes, which is the largest purchase for most Americans, homeowners deserve to keep more of their hard-earned money during their golden years."
"California REALTORS® thank Congressman Panetta for introducing the "More Homes on the Market Act,' which will provide the necessary tax relief for California homeowners, particularly senior citizens, who have been unable to move because of the onerous tax burden that could result if they were to sell," said C.A.R. President Otto Catrina, a Bay Area real estate broker and REALTOR.
"On behalf of the more than 1.5 million members of the National Association of REALTORS®, I express my deep appreciation to Congressman Panetta and Congressman Kelly for introducing the "More Homes on the Market Act," a bill that would increase the maximum amount of capital gain that a homeowner can exclude on the sale of a principal residence," said National Association of REALTORS 2022 President Leslie Rouda Smith. "Enactment of this legislation would solve a serious and growing problem that is rapidly spreading throughout our Nation. As the months go by and inflation continues to eat away at the current-law exclusion limits, more and more homeowners in every area of the Nation will come to the unwelcome realization that this is adding to our housing crisis. NAR agrees with these leaders that we should take care of this problem now before it grows even worse."
Summary of the More Homes on the Market Act:
The current tax code allows homeowners who sell their home to exclude $250,000 in gains from capital gains taxes, or $500,000 in the case of a joint-filing couple.
The current exclusion amount was first set in 1997 and was not indexed to inflation. If it had been indexed for inflation, it would be $461,325 for single filers and $922,650 today.
The More Homes on the Market Act increases the exclusion to $500,000 for single filers and $1 million for joint filers.
Increasing this exclusion will make it easier for homeowners to sell, getting more homes on the market and increasing housing supply.