Middle Class Home Tax Elimination Act

H.R. 7131 would amend federal tax law to remove existing dollar limits on how much profit homeowners can exclude from taxes when selling their primary residence. Currently, single filers can exclude up to $250,000 in gains and married couples filing jointly can exclude up to $500,000. If enacted, this bill would eliminate those caps entirely, meaning homeowners could exclude any amount of profit from the sale of their main home from federal income taxes, provided they meet existing requirements such as having lived in the home for at least two of the last five years and not using the exclusion more than once every two years.

Proponents argue that the current dollar limits have not been adjusted since 1997 and have not kept pace with home price growth, particularly in high-cost housing markets. They contend that many long-term homeowners now face unexpected tax bills on modest homes by local standards. The bill would apply only to sales occurring after it becomes law. The legislation is currently in committee and has not yet been voted on by the full House.