A bipartisan bill making its way through Congress could raise the amount of profit homeowners can keep tax-free when they sell their primary residence, and it's gaining real momentum on Capitol Hill.

The bill, known as the More Homes on the Market Act, would double the federal capital gains tax exclusion on the sale of a primary home. Right now, single filers can exclude up to $250,000 in profit from capital gains tax, and married couples filing jointly can exclude up to $500,000. Under the proposed legislation, those numbers would rise to $500,000 for single filers and $1 million for joint filers. The bill would also index the exclusion to inflation going forward, so it wouldn't fall out of date again.

WHY IT MATTERS

Those exclusion limits haven't been touched since 1997, when the median home price was around $129,000. Home values have climbed dramatically since then, and a growing number of longtime owners now have more equity built up than the current exclusion covers.

According to National Association of Realtors research, roughly 1 in 3 homeowners, close to 29 million households, has more home equity than the exclusion protects for single filers, and NAR estimates nearly 13 million homeowners would face a tax penalty if they sold today.

For many owners, that tax exposure is a reason to stay put rather than sell, even when their home no longer fits their needs. Supporters of the bill argue that updating the exclusion could free up more housing inventory by making it easier for longtime owners, particularly older homeowners looking to downsize, to move without a significant tax bill.

WHERE THE BILL STANDS

The More Homes on the Market Act has bipartisan backing in both the House and Senate. Support has continued to build through the summer, with the bill now counting 151 House members and 23 Senators as co-sponsors, roughly 1 in 3 voting members of Congress. The House and Senate versions are nearly identical, differing mainly on how the exclusion would be indexed to inflation going forward. Both chambers would still need to agree on a final version before it could become law.

WHAT THIS MEANS FOR HOMEOWNERS RIGHT NOW

The bill has not passed, and current law still applies: a $250,000 exclusion for single filers and $500,000 for married couples filing jointly. If you're weighing whether to sell now or wait, it's worth running the numbers with a tax professional, especially if you've owned your home for a long time or have significant equity.

We'll continue to track this legislation and keep our clients updated as it moves through Congress. If you have questions about how capital gains tax could affect the sale of your home, our team is here to help you think it through.

Contact our Client Care Team at (732) 499-0030 or info@hallmarkrealtors.com.

This article is for informational purposes only and is not tax or legal advice. Please consult a qualified tax professional regarding your specific situation.

Source: Realtor.com, "Bill To Double Capital Gains Tax Exclusion Picks Up Momentum in Congress"