President Trump is considering removing capital gains taxes on home sales to stimulate the housing market. The change would benefit long-time homeowners in expensive markets. The real estate industry has long pushed for this to help homeowners relocate or downsize. Congressional approval would be needed for any changes.

In markets like San Francisco, homeowners could face significant tax bills due to rising home prices. Inventory constraints and high prices have pushed home prices up. However, helping wealthier homeowners could impact affordability. Approximately 10% of homeowners exceed the current $500,000 limit for couples, especially in high-priced states.

Alex Caswell, a financial advisor, believes affluent homeowners who have owned their homes for a long time would benefit from the removal of capital gains taxes. This could lead to increased buying and selling activity, but it may pose challenges for first-time buyers. Congressional approval would be required for any changes.

A growing number of home sales exceed the capital gains limit, especially in states like California, Hawaii, and Washington, D.C. Financial planners argue the current $500,000 exclusion for couples is insufficient. Homeowners in the Northeast and Pacific Coast could be affected, regardless of income levels. The Budget Lab at Yale found the average affected homeowner is nearly 65 years old with a net worth of $5.7 million.

Advocates differ on how to address capital gains taxes on home sales. Some propose eliminating the tax altogether, while others suggest raising the limits to keep up with inflation. The current caps have remained unchanged since 1997 and may not adequately reflect today’s market realities. Changes would impact homeowners across the country, particularly those with high home values. Financial advisor Claire Boston advises clients facing large tax bills from home sales to consider downsizing to avoid high-interest home equity loans. Small incomes in retirement often fall into lower capital gains brackets, making downsizing a financially savvy move. Sign up for the Mind Your Money newsletter for more financial insights.

Read more at Yahoo Finance: Eliminating capital gains on home sales would be a boon for older homeowners in high-cost states