HR-1340-119
Referred to the House Committee on Ways and Means.
Sponsored by Jimmy Panetta (D-CA)
What it does
This bill would double the amount of profit from selling a primary home that homeowners can exclude from federal income taxes — from $250,000 to $500,000 for single filers, and from $500,000 to $1,000,000 for married couples filing jointly. It would also require these thresholds to be adjusted each year to keep pace with inflation, which the current law does not do.
Who benefits
Homeowners who have owned their primary residence for many years and have seen significant appreciation in its value — particularly those in high-cost housing markets such as California, New York, Hawaii, and the Pacific Northwest, where home values frequently exceed current exclusion limits. Older homeowners and retirees looking to downsize who have accumulated large gains. Surviving spouses who must file as single filers after a partner's death. Real estate agents and brokers who may see increased transaction volume if more homeowners choose to sell. Homebuilders and the broader housing supply chain if more existing homes enter the market.
Who is hurt
Federal taxpayers broadly, who would bear the cost of reduced income tax revenue. Lower- and middle-income renters who do not own homes and would receive no direct benefit, while potentially facing continued or increased competition for housing if the supply effect is smaller than projected. First-time homebuyers if increased seller activity does not translate into meaningfully lower prices. State governments that conform to federal tax definitions may also see reduced state income tax revenue.
Supporters argue
Supporters argue that the current exclusion limits — set in 1997 and never adjusted for inflation — have lost roughly half their real value over nearly three decades, meaning homeowners are now taxed on gains that are largely the result of inflation rather than real wealth accumulation. They contend that this tax burden acts as a "lock-in" effect, discouraging long-term homeowners from selling and thereby reducing the supply of existing homes on the market at a time of acute national housing shortage. Doubling the exclusion and indexing it to inflation, they argue, would encourage more homeowners to sell, increasing inventory and easing price pressure for buyers.
Opponents argue
Opponents argue that the primary beneficiaries would be high-income homeowners in expensive markets who have accumulated the largest gains — not the moderate-income families or first-time buyers most burdened by today's housing costs. They contend that the evidence linking capital gains tax exclusions to meaningful increases in housing supply is limited, and that the bill would reduce federal revenue by billions of dollars annually while delivering its largest benefits to those who need assistance least. Critics also note that the inflation-indexing provision, while reasonable in isolation, compounds the long-term revenue cost without a guaranteed supply-side payoff.
Constitutional context
This bill modifies federal income tax exclusions under Congress's authority granted by the Sixteenth Amendment, which allows taxation of income without apportionment among the states. No significant constitutional tension is present; adjusting existing income tax exclusions is well within established congressional taxing power. The Origination Clause (Art. I, §7, cl. 1) requires revenue bills to originate in the House, which this bill does, having been referred to the House Committee on Ways and Means.
Checks and balances
Congress gains no new authority — this bill narrows existing revenue collection by expanding an exclusion; the IRS would implement and enforce the updated thresholds, and Congress retains authority to modify or repeal the change in future legislation.
Historical precedent
The current home sale exclusion was established by the Taxpayer Relief Act of 1997, which replaced a one-time exclusion for sellers over age 55 and a rollover provision; this bill would be the first significant modification to those dollar thresholds since enactment.