Home Sale Tax Exclusion Doubles to $1 Million for Couples: How the 'More Homes on the Market Act' Changes Capital Gains

The “More Homes on the Market Act” is a piece of legislation aimed squarely at homeowners, specifically those who have seen significant appreciation in their property values. This bill proposes a massive increase in the amount of profit you can pocket tax-free when you sell your primary residence.

Right now, if you sell your main home, you can exclude up to $250,000 in profit from capital gains tax if you’re single, or $500,000 if you’re married and filing jointly. This bill doubles those numbers. Under the new rules (Section 2), a single taxpayer could exclude up to $500,000, and married couples could exclude up to a whopping $1,000,000 of the gain from the sale. These changes apply to sales that happen immediately after the law is enacted.

The Million-Dollar Question: Who Benefits?

This is a huge deal for long-term homeowners, particularly those in high-cost areas who have watched their home values skyrocket over the last decade. Think of a couple who bought their starter home 25 years ago for $200,000 and are now selling it for $1.5 million. Their profit is $1.3 million. Under current law, they’d pay capital gains tax on $800,000 of that profit ($1.3 million minus the $500,000 exclusion). Under this bill, they would only pay tax on $300,000 ($1.3 million minus the new $1 million exclusion). That’s a massive tax savings that could be used for retirement, a down payment on a smaller home, or simply padding their savings.

The bill also includes a smart provision for the future: starting in 2026, these new $500,000 and $1,000,000 exclusion amounts will be adjusted annually for inflation (Section 2). This means the benefit won't be eroded over time by rising costs, ensuring that the tax break remains relevant for the next generation of sellers.

The Catch-22: What Does It Mean for the Rest of Us?

The stated goal of this bill is to encourage existing homeowners—perhaps those who are “house-rich and cash-poor,” or just reluctant to move due to the tax hit—to finally put their homes on the market. The thinking is that if more existing homes are listed, the housing supply increases, and prices might stabilize or even drop for buyers. That’s the theory.

However, in the real world, this benefit primarily flows to those who already own highly appreciated assets. If you’re a first-time buyer or a renter, this bill doesn't directly help your bottom line. In fact, if the bill doesn't spur a massive wave of new listings, it could simply reduce federal tax revenue while doing little to alleviate the inventory shortage. The biggest beneficiaries are those with the largest gains, which generally means wealthier individuals or those who bought decades ago.

It’s a classic policy trade-off: a clear, substantial tax benefit to incentivize movement on the supply side, but one that disproportionately rewards existing wealth. Whether this incentive is large enough to get a significant number of people to sell their homes and actually increase market inventory—and thus help first-time buyers—remains to be seen. But for any homeowner sitting on a mountain of equity, this bill is a game changer for their retirement planning.