Seniors who bought homes decades ago in high-cost metro areas could keep hundreds of thousands of dollars more from a sale under a bill introduced by Rep. Nicole Malliotakis, a Republican from New York. Her legislation, H.R. 9064, would raise the federal capital gains exclusion on home-sale profits to $1 million for homeowners aged 65 and older, up from the current limits of $250,000 for single filers and $500,000 for married couples filing jointly. The proposal targets a gap that has widened as home values in cities like New York, San Francisco, and Los Angeles have surged far beyond the thresholds Congress set in 1997.
Who gains most from a $1 million exclusion threshold
The central question is not whether seniors pay capital gains taxes on home sales but which seniors do. Under the existing rules in Section 121, homeowners who meet ownership and use tests can already exclude $250,000 (single) or $500,000 (joint) in profit from the sale of a principal residence. Analysis from the Brookings Institution found that roughly 95% of all households and about 90% of households aged 65 and older owe no federal capital gains tax on a home sale because their profits fall below those existing limits.
That means the proposed increase would affect a relatively narrow slice of the senior population, concentrated in markets where long-held properties have appreciated well beyond $500,000 in gain. A couple who purchased a home in coastal California or the New York metro area before 2000 for $300,000 and sells it for $1.5 million would currently face taxes on $700,000 of the $1.2 million gain. Under H.R. 9064, their entire profit would be shielded. The tax savings would be largest not where housing inventory is tightest but where cumulative price appreciation since 1997 has exceeded the current exclusion by the widest dollar margin.
These beneficiaries are more likely to be long-tenured owners with substantial equity, often in single-family homes on larger lots. In many cases, they are also relatively higher-income retirees who have already paid off their mortgages. While the bill is framed as relief for seniors generally, the distribution of benefits would tilt toward households whose gains are large enough to breach today’s caps and whose properties sit in the upper tiers of local markets.
Malliotakis frames the bill as a supply fix
Rep. Malliotakis, who introduced the measure, argues the higher exclusion would address what housing economists call the “lock-in effect,” where older homeowners stay put to avoid a tax hit on accumulated equity. Her office contends that reducing the tax burden would encourage more seniors to list their homes, adding inventory to a market that badly needs it. The reasoning is straightforward: if the financial penalty for selling shrinks, more owners will sell.
That logic has limits. A Brookings Institution analysis raises a pointed counterargument: if 90% of senior households already face no federal capital gains tax on a sale, a higher exclusion cannot unlock supply from the vast majority of older owners. The remaining 10% are disproportionately owners of high-value properties in expensive metros. Whether those specific sellers would list homes in response to tax relief, and whether their listings would meaningfully ease shortages in the entry-level and mid-market tiers, is far from certain.
Even among seniors who do face a tax bill today, capital gains are only one factor in the decision to move. Health needs, proximity to family, emotional attachment to a longtime home, and the difficulty of finding a suitable downsized property in the same community all weigh heavily. A more generous exclusion might tip the scales for some, but it is unlikely to overcome nonfinancial barriers for many others.
Fiscal and equity considerations
Raising the exclusion to $1 million for older homeowners would also have budget implications. Every dollar of gain that becomes newly exempt represents forgone federal revenue. Because the change is targeted to households with large unrealized gains, the cost per affected taxpayer could be substantial even if the number of beneficiaries is modest. Lawmakers weighing the bill will have to consider whether the potential increase in housing turnover justifies that revenue loss.
Equity questions loom as well. Seniors in lower-cost regions, whose homes have appreciated modestly, are unlikely to see any benefit because their gains already fall below $250,000 or $500,000. Renters, including many older adults with limited savings, would receive no direct help. Critics may argue that the bill prioritizes tax relief for relatively wealthier homeowners in coastal markets while doing little for lower-income seniors or younger buyers struggling with high prices and limited supply.
What comes next in Congress
H.R. 9064 is at an early stage in the legislative process, and its prospects are uncertain in a divided Congress. Any change to the capital gains exclusion would need to move through the tax-writing committees before reaching the floor. Constituents can track the bill’s progress and contact their representatives through the official House website, where updates on hearings, markups, and votes are posted.
For now, the proposal underscores how the long-run run-up in home prices is exposing the limits of a tax framework written nearly three decades ago. Whether lawmakers ultimately embrace a higher exclusion for seniors, they will be forced to confront the broader question of how to balance housing affordability, tax fairness, and federal revenue in a market that looks very different from 1997.
