Rumor Alert: No Capital Gains Tax onNJ Home Sales?

There’s a new tax idea circulating that could have major implications for homeowners and for your timing and strategy if you’re thinking about selling.

What’s the Current Rule?

Under the current federal tax rules, if you sell your primary residence and you’ve owned and lived in it for at least two of the last five years, you qualify to exclude from capital-gains tax up to $250,000 of gain if you’re single, or $500,000 if you’re married and filing jointly. 

In other words: if your profit on the sale is under that amount (and you meet the ownership/use tests), you don’t pay capital gains tax on that gain.

What’s the Rumour / Proposal?

In July 2025, President Donald Trump announced that his administration is “thinking about” eliminating the federal capital-gains tax on home sales altogether, at least for primary residences.

The idea is straightforward: rather than just excluding up to $250K/$500K, homeowners might pay zero federal capital-gains tax when they sell their home (assuming primary residence rules apply). The proposal would require new legislation and is not yet law.

Why Is This Being Considered?

Here are a few of the motivations and potential effects:

• With home values having surged in many markets, the $250K/$500K exclusion threshold hasn’t kept pace with appreciation. 

• Some analysts say homeowners feel “locked in” because selling triggers big tax bills (or they fear it will), reducing mobility and suppressing housing inventory.

• Supporters argue that eliminating the tax could unlock housing supply, which might ease price pressures and encourage more turnover in tight markets.

Who Would Benefit & Who Might Not?

• A key point: According to the Yale Budget Lab, only about 10 % of homeowners in 2022 had gains above the current exclusion thresholds ($250K/$500K), meaning the benefit of full elimination would go disproportionately to higher-value homes, higher-net-worth households. 

• Some criticism: Analysts caution that sweeping elimination could favour wealthier homeowners and do little for modest-value sellers, while potentially increasing federal revenue loss and possibly accelerating housing price gains (if more sellers enter the market). 

• For homeowners in high-cost states or who have owned homes for decades, the potential tax savings could be large. But whether it changes their decision to sell depends on many factors (interest rates, housing supply, personal situation). 

What This Could Mean for You (in Northern NJ & Beyond)

Since you are active in the market in northern New Jersey:

• If the tax were eliminated, homeowners with significant equity might feel less deterred by the “tax hit” of selling, which could mean more inventory coming online (which could help buyers and also shift competitive dynamics for sellers).

• On the flip side: this is still only rumour/proposal, nothing is set in stone, so any decision based purely on this change carries risk.

• You may also want to keep monitoring how the legislation evolves, timing could matter a lot (when it passes, how it is implemented, what other provisions accompany it).

Is tax exposure (specifically potential capital gains on a home sale) currently one of the reasons you’ve been holding off on selling or is this something you didn't even know about? 

Would the possibility of no federal capital-gains tax on a primary home sale encourage you to move forward with selling?

Let me know! I’d love to help you understand how this could affect your current or future decisions and timing.