How Capital Gains Rules Are Keeping Homeowners Stuck in 2025

If you've owned your home for a while, you've likely built up some serious equity—and congratulations, that's no small feat! But what if that hard-earned equity is actually what's keeping you stuck—preventing you from moving forward? You're not alone. Thanks to outdated capital gains tax rules, many homeowners are finding themselves stuck—and it's affecting the entire housing market.

Let's break down what's happening, why it matters, and what changes could be coming that might finally bring some relief.​

The Capital Gains Tax Rule That Hasn't Budged Since 1997

Right now, homeowners can exclude up to $250,000 of capital gains from the sale of their primary residence if they're single, or up to $500,000 if married and filing jointly. This rule hasn't been updated since 1997—and we all know how much home values have risen since then.

This means that for many longtime homeowners, selling their home now could result in a hefty tax bill simply because their property has appreciated significantly over the years. Instead of feeling rewarded for responsible homeownership, these sellers are feeling punished.

How This Impacts the Real Estate Market

This outdated tax rule is leading to what economists are calling the "stay-put penalty." It's especially affecting seniors who would otherwise downsize, relocate, or move closer to family. The fear of a major tax hit is keeping them in homes they've outgrown, which in turn keeps those homes off the market.

This creates a ripple effect: fewer homes available for first-time buyers, less inventory for growing families looking to move up, and more pressure on home prices across the board. In short, it slows everything down.

The Numbers Tell the StoryAccording to new research from the National Association of REALTORS® (NAR):

34% of homeowners (29 million) could already have enough equity to exceed the $250,000 capital gains cap.

Over 10% (8 million) may exceed the $500,000 threshold.

By 2030, more than 56% of homeowners could face this issue, rising to nearly 70% by 2035.

High-cost states like California, Massachusetts, and Colorado are especially impacted, but the trend is spreading nationwide.

What Could Change:

The More Homes on the Market ActThere is hope on the horizon. NAR is backing a bipartisan bill called the More Homes on the Market Act, which would:

• Double the capital gains exclusion to $500,000 for individuals and $1 million for married couples
• Tie those thresholds to inflation moving forward
• Help free up inventory by making it more financially feasible for longtime owners to sell

This could be a game-changer for homeowners who feel stuck, and it would give the housing market a much-needed boost by increasing the supply of available homes.

What This Means for You

If you're a homeowner in North Idaho or anywhere with fast-rising property values, you might already be nearing or exceeding these caps. The good news? You have options—and the earlier you start planning, the more flexibility you have.

Whether you're thinking about selling soon, curious about your current equity, or just want to be ready if the law changes, it's a smart idea to talk to both a real estate professional and a tax advisor.

Final Thoughts:

Equity Should Be an Opportunity, Not a BurdenHomeownership has always been one of the most reliable ways to build wealth in America. But when outdated tax rules start turning that success into a liability, something has to give.

If you're feeling stuck by your equity or unsure about what selling could mean for your finances, let’s chat. There may be more options than you realize.  If you're wondering how your equity might affect your plans, I'm happy to walk you through your options—no pressure, just helpful information.

Contact me today to schedule a no-obligation consultation and take the first step toward your next chapter.