Trump’s Capital Gains Tax Proposal Prompts Homeowners to Delay Sales Amid Housing Crunch

President Donald Trump’s recent statement about potentially eliminating the capital gains tax on home sales is causing a stir among homeowners, with some now delaying property listings in anticipation of a significant tax cut. The proposal, aimed at boosting housing inventory amidst high interest rates, comes as bipartisan efforts in Congress are already underway to reform the existing tax.

Many older Americans, like Joel Friedman, 71, and his wife Kathryn, are finding themselves in a dilemma. The empty-nesters want to downsize from their large Southern California home but are deterred by the substantial capital gains tax, which can be up to 20% on profits exceeding $500,000 for married couples. After putting their house on the market in May, the Friedmans are now letting their listing expire, hoping the law changes before they try to sell again.

This reluctance to sell is exacerbating a shortage of family-sized homes, as a growing number of homeowners, particularly boomers, are holding onto valuable properties that represent their retirement nest eggs. A 2025 report by the National Association of Realtors indicated that approximately 34% of American homeowners could exceed the $250,000 cap for single filers, and 10% could exceed the $500,000 threshold if they were to sell.

Trump’s comments on July 22, where he stated, “we are thinking about no tax on capital gains on houses,” have invigorated discussions. This aligns with Republican Rep. Marjorie Taylor Greene’s recent legislation, the “No Tax on Home Sales Act.” Democratic support for reform also exists, with Rep. Jimmy Panetta introducing a bill to double the tax exclusion to $1 million for joint filers and index it to inflation.

While proponents believe such changes could incentivize sales and increase housing supply, some economists are cautious. Selma Hepp, chief economist at CoreLogic, suggests it might lead to more turnover rather than a significant increase in overall inventory, especially in expensive markets. Concerns also include the potential for sellers to use newfound profits to bid up prices on their next homes and the disproportionate benefit to higher-income Americans, along with a significant loss in federal revenue.

Despite the complexities, the prospect of tax relief is undeniably influencing homeowners’ decisions, highlighting the critical role of tax policy in the nation’s housing market dynamics.

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