In July 2025, President Donald Trump revealed that his administration is considering a dramatic shift in the way capital gains from home sales are taxed. Soon after, Representative Marjorie Taylor Greene introduced a proposal titled the “No Tax on Home Sales Act.” The bill seeks to eliminate the existing caps on capital gains exclusions for sales of primary residences under Section 121 of the Internal Revenue Code.

At first glance, the bill looks like a homeowner-friendly reform, aimed at easing the burden on those selling their main homes. However, its potential ripple effects across the housing and investment markets make it worth examining closely from a real estate investor’s perspective.

What Does the Legislation Suggest?

Currently, taxpayers can exclude up to $250,000 in gains for single filers and $500,000 for married couples when they sell a primary residence, as long as they meet ownership and use requirements. The new bill proposes eliminating those limits entirely.

In short, the law would:

• Remove the dollar limits from Section 121(b).
• Adjust Section 121(c) with minor conforming changes.
• Apply to sales or exchanges completed after the enactment date.

The goal is straightforward—homeowners could potentially exclude unlimited gains from the sale of their primary residence, provided other conditions are met.

Key Limitation: Only Primary Homes Qualify

For real estate investors, one important caveat stands out: the law would apply strictly to principal residences. This means:

• It does not extend to vacation homes, rental properties, or commercial investments.
• It does not change depreciation recapture rules or alter capital gains tax treatment for income-producing real estate.

So while the law could benefit homeowners in expensive or fast-appreciating markets, investors holding rental portfolios or commercial assets would not directly see relief.

Indirect Effects Investors Should Watch

Even though the bill doesn’t target investment property, it could still influence the real estate landscape in ways that matter to investors. Here are five potential outcomes:

1. Homeowners may sell more often in hot markets
   By removing the cap on gains exclusions, long-term owners in places like California, New York, or Florida might finally decide to sell. This could increase housing supply and present investors with more purchase opportunities, including aged listings or homes sold directly by owners.

2. Rise of “live-in flips”
   The requirement to live in a home for two of the last five years to qualify for the exclusion still applies. But with unlimited exemptions, more owner-occupants might renovate and resell homes every few years without paying taxes on gains. Some investors may even explore creative ways to co-own or temporarily occupy properties to qualify. However, the IRS is likely to closely monitor misuse of this rule if activity spikes.

3. Push to include rental properties in future reforms
   Small landlords and investors in long-term rentals may advocate for the benefits to be extended to non-primary homes. Whether such expansions gain momentum will depend on political negotiations and federal budget considerations.

4. Luxury housing market could accelerate
   One of the biggest beneficiaries would be owners of luxury primary residences where appreciation often far exceeds the current $500,000 cap. Eliminating the ceiling could lead to more high-end listings, potentially boosting activity in the upscale housing sector and creating new opportunities for developers and investors.

5. Increased housing mobility
   Without the fear of large tax bills, more people may feel comfortable moving. This could loosen up supply in tight markets and raise turnover rates, indirectly benefiting contractors, real estate professionals, and service providers tied to housing activity.

Commercial Real Estate Considerations

The bill does not touch commercial or mixed-use real estate directly. However, if passed, it could create momentum for broader tax reform. Possible outcomes include:

• Calls for similar treatment of long-held rental or commercial properties.
• Adjustments in 1031 exchange activity, as policy discussions around capital gains gain traction.Shifts in investor strategy depending on whether future reforms include or exclude income-generating assets.

Tax Strategies Investors Can Still Use

Although the proposed law won’t cut taxes for investment property owners directly, two powerful tools remain available to reduce or defer liabilities:

1. 1031 Exchanges
   This strategy allows investors to defer capital gains taxes by reinvesting proceeds from one property sale into another “like-kind” property. Benefits include:

• Preserving capital for reinvestment.
• Scaling up into larger or better-performing properties without losing funds to taxes upfront.Compounding long-term wealth by continuously rolling forward gains tax-deferred.

For investors building portfolios over decades, the 1031 exchange remains one of the most effective methods to grow without immediate tax erosion.

2. Self-Directed IRAs
   A self-directed IRA lets investors buy and hold real estate within a retirement account. Income and gains inside the account can grow tax-deferred, or even tax-free in a Roth IRA. This approach allows:

• Rental income and appreciation to accumulate without immediate taxation.
• Diversification of retirement funds into property alongside stocks or bonds.
• Potential legacy planning advantages with favorable tax treatment.

For investors thinking long-term, self-directed IRAs can combine real estate strategies with retirement planning while minimizing exposure to taxes.

Final Thoughts

The No Tax on Home Sales Act may look like a sweeping tax cut for homeowners, but its scope is limited to primary residences. For real estate investors, the law does not remove the burden of taxes on investment property gains. Still, the indirect effects—more supply, new flipping strategies, and increased market activity—could shape investment opportunities in meaningful ways.

Meanwhile, tried-and-true strategies like 1031 exchanges and self-directed IRAs remain indispensable for investors determined to manage tax exposure while building portfolios. Whether through deferring taxes on reinvestment or holding property inside retirement accounts, these tools give investors the flexibility to grow wealth strategically.

As always, individual circumstances vary. Real estate investors should consult tax professionals and legal advisors to determine how proposed legislation and existing strategies might affect their unique situations.