rewrite this title What the “No Tax on Home Sales Act” Really Means For Real Estate Investors

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In July 2025, President Donald Trump announced that his administration is considering a sweeping change to how capital gains are treated on home sales. Days later, Representative Marjorie Taylor Greene introduced legislation titled the “No Tax on Home Sales Act,” a proposal aimed at eliminating dollar limitations on the capital gains exclusion for principal residences under Section 121 of the Internal Revenue Code.

At first glance, the bill appears to provide relief only for homeowners selling their primary residences. But the potential ripple effects for real estate investors—particularly those active in residential and commercial markets—warrant a closer look.

What Does the Bill Propose?

The No Tax on Home Sales Act would amend Section 121(b) of the Internal Revenue Code by striking the current dollar limitations on capital gains exclusions for the sale of a principal residence.

Under current law, taxpayers may exclude up to $250,000 of gain (single filers), or $500,000 of gain (married filing jointly) from the sale of their primary residence, provided ownership and use tests are met.

The proposed bill would remove those caps entirely, allowing for unlimited capital gains exclusion on qualifying primary home sales.

The bill’s language is relatively simple:

Strikes the dollar limits from Section 121(b)

Makes minor conforming amendments to Section 121(c)

Applies to any sales or exchanges occurring after the enactment date

Key Limitation: It Only Covers Principal Residences

For real estate investors, one key limitation is worth underscoring: The bill applies only to principal residences. That means:

It does not apply to investment properties, vacation homes, or rental properties.

It does not change the rules around depreciation recapture or capital gains taxes on commercial real estate.

So while the bill offers potential tax relief for homeowners with substantial appreciation in their primary residence—particularly in high-growth housing markets—it doesn’t directly impact most real estate held for investment purposes.

Indirect Implications for Real Estate Investors

Even though the bill doesn’t cover investment properties outright, here are five ways it may still affect real estate investors:

1. More homeowners may sell in high-appreciation markets

With capital gains exclusions uncapped, homeowners sitting on significant unrealized gains—especially in coastal or high-growth metro areas—may be more inclined to sell. This could lead to:

Increased inventory

More opportunities for investors to acquire off-market or aged listings

2. Flipping strategies could shift

While the law still requires the home to be a principal residence (generally for two of the last five years), it could inspire more “live-in flip” strategies:

Owner-occupants may rehab and sell every two years tax-free.

Investors may explore co-ownership or live-in arrangements to qualify.

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However, keep in mind that IRS scrutiny of abuse around Section 121 is likely to increase if this change passes.

3. Pressure to broaden the definition of covered properties

Investors in single-family rentals and small multifamily homes may lobby for the next iteration of the bill to:

Include long-term rental properties held over a certain period

Offer similar tax relief for “mom-and-pop” landlords

Whether such expansion gains traction depends on broader tax reform negotiations and budgetary implications.

4. Luxury real estate may heat up

The bill could remove one of the major tax deterrents for selling luxury primary residences, where gains often exceed the current $500,000 exclusion. This could spur:

Increased listings in luxury markets

More investment in high-end home construction or redevelopment

5. Downstream effects on housing market liquidity

As more homeowners are incentivized to sell without fear of capital gains taxes, this may:

Increase housing mobility

Free up supply in inventory-constrained markets

Boost housing turnover, indirectly benefiting real estate professionals, contractors, and service providers

What About Commercial Real Estate?

The bill has no direct provision for commercial or mixed-use real estate. However, if passed, it could:

Create political momentum for broader capital gains reform

Trigger future bills proposing similar tax treatment for long-held commercial or rental properties

Indirectly affects 1031 exchange volumes (more below)

Tax-Saving Strategies Still Available for Real Estate Investors

Even if the No Tax on Home Sales Act does not provide direct tax relief for investment properties, real estate investors still have strategies to minimize or defer taxes. Two of the most powerful tools are the 1031 exchange and the self-directed IRA.

1031 exchanges

A 1031 exchange allows investors to defer capital gains taxes when selling an investment property, as long as the proceeds are reinvested into another like-kind property. This strategy helps investors:

Preserve more capital to reinvest and grow their portfolios

Upgrade into larger or higher-performing properties without losing funds to taxes upfront

Continue compounding wealth over time by rolling gains forward tax-deferred

For long-term investors, the 1031 exchange remains one of the most effective ways to build wealth while managing tax exposure.

Self-directed IRAs

A self-directed IRA enables investors to purchase and hold real estate inside a retirement account, where income and gains can grow tax-deferred—or even tax-free in the case of a Roth IRA. 

With this approach, investors can:

Earn rental income and appreciation within the IRA without immediate tax consequences

Diversify retirement savings into real estate alongside traditional assets

Potentially pass on wealth with favorable tax treatment, depending on the account type

By leveraging a self-directed IRA, investors can align their real estate strategies with long-term retirement planning goals while reducing their overall tax burden.

Final Thoughts

While the No Tax on Home Sales Act may be seen as a taxpayer-friendly reform for homeowners in appreciating markets, it is narrow in scope—focused only on principal residences. For real estate investors, it does not directly reduce taxes on investment property sales.

The good news is that investors already have time-tested strategies available. Tools like 1031 exchanges and self-directed IRAs remain critical for deferring or eliminating taxes while continuing to build wealth. Whether it’s exchanging into a new property without triggering capital gains or holding real estate inside a tax-advantaged retirement account, these approaches provide meaningful opportunities to reduce tax exposure and grow portfolios more efficiently.

As always, investors should consult their tax advisor or legal counsel to evaluate how proposed legislation and existing strategies apply to their unique situation. 

Explore tax-advantaged investing strategies at TrustETC.com/RealEstate.

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