S-3332-119
Read twice and referred to the Committee on Finance.
Sponsored by John Cornyn (R-TX)
What it does
This bill would amend the Internal Revenue Code to double the amount of profit homeowners can exclude from federal capital gains taxes when selling their primary residence — 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 add an inflation adjustment so these thresholds automatically increase each year based on the cost-of-living index, starting in 2026. The changes would apply to home sales occurring after the bill's enactment.
Who benefits
Homeowners — particularly those in high-cost housing markets such as California, New York, Massachusetts, and the Pacific Northwest — who have accumulated large gains and would otherwise owe capital gains taxes upon selling. Long-term homeowners who bought decades ago and have seen substantial appreciation. Older homeowners looking to downsize or relocate. Real estate agents and brokers who may see increased transaction volume if more sellers enter the market. Homebuyers who could benefit if increased seller activity adds housing supply. Surviving spouses who currently face the lower single-filer threshold after a partner's death.
Who is hurt
The federal government would collect less capital gains tax revenue, potentially requiring spending reductions or offsetting revenue measures elsewhere. Renters and first-time buyers may see limited benefit if increased supply does not materialize or is offset by demand. Taxpayers who do not own homes — including lower-income households — would not benefit from the exclusion but could bear indirect costs if the revenue loss is offset through other means. Investors in competing asset classes who do not receive equivalent tax treatment may face a relative disadvantage.
Supporters argue
Supporters argue that the current $250,000/$500,000 exclusion thresholds were set in 1997 and have never been adjusted for inflation — meaning they have lost roughly half their real value over nearly three decades. They contend that in high-cost markets, many middle-class homeowners now face capital gains taxes that effectively lock them into homes they would otherwise sell, reducing housing supply and contributing to affordability problems. Doubling the exclusion and indexing it to inflation, they argue, would encourage more homeowners to list their properties, increasing inventory and easing price pressure for buyers.
Opponents argue
Opponents argue that the primary beneficiaries would be high-wealth homeowners in expensive markets, not middle-class families, since most sellers already fall well below the existing $250,000/$500,000 thresholds. They contend the bill would reduce federal revenue — potentially by tens of billions of dollars over a decade — without a guaranteed supply-side effect, since sellers may simply reinvest in comparable homes rather than freeing up inventory. Critics also argue that the inflation indexing provision creates an open-ended, permanent revenue loss that compounds over time without any mechanism for congressional review.
Constitutional context
This bill modifies income tax law 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 an existing exclusion from income tax is a well-established exercise of congressional taxing power under Art. I, §8, cl. 1.
Checks and balances
Congress gains no new authority — this bill narrows existing tax collection by expanding an exclusion; the IRS administers the change, and Congress retains authority to modify or repeal the thresholds 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 55 and a rollover provision; this bill would be the first statutory increase to those thresholds since 1997.