Proposed Federal Tax Bill Could Double the Capital Gains Exclusion on Home Sales

For homeowners across Southwest Florida, one proposed federal bill could have a significant impact on the decision to sell a home.

The More Homes on the Market Act (H.R. 1340) would double the federal capital gains exclusion for the sale of a primary residence—from the current $250,000 to $500,000 for individuals, and from $500,000 to $1 million for married couples filing jointly. The legislation would also index the exclusion for inflation going forward. (Congress.gov)

As of August 2026, the proposal has gained meaningful support in Congress, with 151 House members and 23 Senators supporting the legislation, according to recent reporting. However, it is important to remember that the bill has not become law. (Realtor)

How the Capital Gains Exclusion Works Today

Under current federal law, qualifying homeowners can generally exclude up to:

• $250,000 of capital gain for an individual taxpayer

• $500,000 of capital gain for a married couple filing jointly

Generally, homeowners must have owned and used the property as their principal residence for at least two of the five years preceding the sale, along with meeting other IRS requirements. (IRS)

For example, imagine a married couple purchased their Southwest Florida home years ago for $300,000 and eventually sells it for $1.2 million. Ignoring selling expenses and other tax considerations, that represents a $900,000 gain.

Under today's $500,000 exclusion, up to $400,000 could potentially remain subject to capital-gains taxation.

If the proposed $1 million exclusion became law and the couple qualified, the entire $900,000 gain could potentially fall within the exclusion.

That could make a major difference for longtime homeowners.

Why This Could Matter in Southwest Florida

Southwest Florida has experienced substantial increases in home values over the years. Many homeowners who purchased properties decades ago have accumulated significant unrealized appreciation.

For some homeowners, the potential capital-gains tax associated with selling may be one factor discouraging them from putting their property on the market.

That is one of the primary arguments behind the More Homes on the Market Act: encouraging existing homeowners to sell could help increase housing inventory. Supporters argue that the current exclusion, which was established in 1997, has not kept pace with home-price appreciation or inflation. (California Association of Realtors)

More homes coming onto the market could potentially mean:

More inventory → more choices for buyers → increased mobility for sellers.

Could This Help Florida Homeowners?

Potentially.

Florida has attracted homeowners from across the country, and Southwest Florida has a large population of long-term homeowners and retirees.

A higher capital-gains exclusion could make it easier for some homeowners to:

• Downsize

• Move closer to family

• Relocate to another state

• Move from a larger home into a condominium

• Sell an investment of accumulated home equity

• Transition into a different type of property

For retirees in particular, the ability to sell a long-held home without triggering as much potential federal capital-gains liability could influence their decision to move.

What It Could Mean for the Real Estate Market

If enacted, doubling the exclusion could have broader consequences than simply reducing taxes for individual homeowners.

The policy is specifically designed to encourage homeowners who may otherwise hesitate to sell. If more owners decide to list their homes, the additional inventory could benefit buyers and potentially improve overall market liquidity.

For real estate professionals, that could translate into more listings, more transactions and greater movement within the housing market.

Of course, the actual impact would depend on how many homeowners respond to the change and what happens with mortgage rates, insurance costs, property taxes and home prices.

What Homeowners Should Know

It is important not to make a selling decision based solely on a proposed tax change.

The legislation is still a proposal, not current law. The IRS currently recognizes the $250,000/$500,000 exclusion subject to the applicable requirements. (IRS)

Homeowners considering a sale should speak with their CPA or qualified tax professional about their individual situation before making a decision.

The Bottom Line

The proposed More Homes on the Market Act represents one of the more significant potential changes to the federal taxation of home-sale gains in years.

If Congress ultimately doubles the exclusion to $500,000 for individuals and $1 million for married couples, many longtime homeowners could find selling their primary residence more financially attractive.

For Southwest Florida homeowners who have owned their property for many years and experienced substantial appreciation, this is definitely legislation worth watching.

At Sun National Title Company, we understand that selling a home involves much more than signing documents. From title and closing to coordinating the details of your transaction, our goal is to make the process as smooth and straightforward as possible.

Sun National Title Company

Fort Myers • Cape Coral • Southwest Florida

Close with confidence. Close with Sun.

This article is for informational purposes only and is not tax, legal or financial advice. Proposed legislation can change before becoming law. Consult your tax advisor regarding your individual circumstances.