President Donald Trump told reporters in the Oval Office on 22/7 that he is considering supporting the proposed legislation.
The bill, introduced by Georgia Representative Marjorie Taylor Greene, aims to repeal the existing capital gains tax on real estate transactions. Greene argues this tax is "an outdated and unfair burden, especially given the current inflated US real estate market."
Trump added that lowering interest rates would also stimulate the US housing market. He suggested that if the Federal Reserve (Fed) were to lower rates, eliminating the capital gains tax might not be necessary. However, he confirmed he is still considering the tax exemption.
This move could revolutionize how profits from real estate transactions are taxed for the first time in 30 years. Currently, single individuals receive a $250,000 tax exemption when selling their primary residence (excluding investment or vacation properties), which doubles to $500,000 for joint filers, such as married couples. Both exemption amounts have remained unchanged since 1997.
Greene contends that many long-term homeowners, especially seniors, are hesitant to sell even in a rising market due to the potential capital gains tax. Her proposed bill aims to address the housing shortage and provide long-term financial security for American families.
The National Association of Realtors (NAR) reports that the capital gains tax distorts the housing market by "trapping older Americans in their homes," constricting supply when housing is most needed.
According to the NAR, 34% of US homeowners, representing 29 million people, would exceed the $250,000 exemption if they sold their homes. About 10%, or 8 million people, would surpass the $500,000 limit for joint filers. Consequently, many seniors lack the incentive to sell, even if they desire to live closer to family or downsize.
"The stagnant housing market creates a ripple effect, increasing costs and limiting opportunities, contrary to what public policy should encourage," stated Shannon McGahn, NAR's executive vice president and chief advocacy officer. McGahn believes the situation worsens monthly.
However, Joel Berner, senior economist at Realtor.com, points out that many home sellers already benefit from the $250,000 exemption. Eliminating the tax entirely would primarily benefit wealthy Americans, he argues.
"It won't significantly impact average families unless their home has substantially appreciated. The tax elimination becomes truly beneficial only if their home's value has increased by over $1 million," Berner explained.
While acknowledging that eliminating the capital gains tax could increase housing supply, Berner cautions it would also reduce government revenue. This could attract investors, potentially driving prices even higher.
Tu Anh (CBS News)
