To amend the Internal Revenue Code of 1986 to eliminate the dollar limitations on the exclusion of gain from sales of principal residences, and for other purposes.
- Bill Number
- H.R. 7034
- Origin Chamber
- House
- Congress
- 119th Congress, Session 2
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2026-01-13: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-03-26T08:06:48Z
AI-Generated Summary
Purpose
This bill, H.R. 7034, aims to modify U.S. tax rules for homeowners by removing fixed dollar limits on how much profit (known as "gain") from selling a primary home can be excluded from federal income taxes. A primary home, or principal residence, is the main house where someone lives most of the time. Currently, these limits restrict tax-free exclusions, and the bill seeks to allow fuller exclusions to potentially benefit more homeowners.
Key Provisions
- Amendment to Section 121(b) of the Internal Revenue Code: Removes paragraphs (1), (2), and (4), which set the dollar limits for exclusions (currently $250,000 for single filers and $500,000 for married couples filing jointly). It redesignates the remaining paragraphs to simplify the structure.
- Conforming Changes to Section 121(c): Updates references in this section to align with the new structure, ensuring rules on reduced exclusions (e.g., for partial business use of the home or sales within short time periods) still apply without the old dollar caps.
- Effective Date: The changes apply to home sales and exchanges occurring after the bill becomes law.
Significant Changes to Existing Law
- Under current law (Section 121), qualifying homeowners can exclude up to $250,000 (single) or $500,000 (married) of gain from taxes if they owned and lived in the home for at least two of the five years before sale. Gains above these amounts are taxable as capital gains.
- This bill eliminates these caps entirely, meaning all qualifying gains could be excluded, provided other requirements (like ownership and use tests) are met. It does not change those core tests but streamlines the code by removing limit-related language.
Potential Impacts
- On Citizens: Homeowners, especially those with high-value properties or large gains (e.g., in expensive housing markets), could save significantly on taxes, keeping more money from sales. This might encourage home sales, relocations, or investments in larger homes, but could widen wealth gaps if benefits skew toward higher-income individuals.
- On Government Agencies: The Internal Revenue Service (IRS) would process more full exclusions, potentially simplifying some filings but reducing federal tax revenue from home sale gains. The U.S. Department of the Treasury might see lower overall capital gains tax collections, affecting budget planning.
- On International Relations: Minimal direct impact, though foreign investors in U.S. real estate could indirectly benefit if they qualify as residents, potentially influencing cross-border property transactions.
Main Stakeholders Affected
- Homeowners and Sellers: Primary beneficiaries, particularly middle- and upper-income individuals in high-cost areas like California or New York.
- Real Estate Industry: Agents, builders, and lenders may see increased market activity due to reduced tax barriers on sales.
- Taxpayers and Filers: Affects how individuals report home sale income on tax returns.
- Government Entities: IRS for enforcement and administration; Congress and Treasury for revenue implications.
Notable Legal, Constitutional, or Political Implications
- Legal: Simplifies the tax code by removing outdated limits (originally set in 1997), but could lead to future litigation if ambiguities arise in applying exclusions to complex cases (e.g., inherited homes or divorces). No direct challenge to constitutional principles like equal protection, as it applies uniformly to qualifiers.
- Constitutional: Neutral; tax policy falls under Congress's broad authority to levy and regulate taxes (Article I, Section 8).
- Political: Represents a pro-taxpayer shift in housing policy, potentially appealing to homeowners but criticized for reducing revenue without offsets, which could fuel debates on fiscal responsibility or equity in tax breaks favoring property owners over renters. As an introduced bill in the 119th Congress (referred to the House Ways and Means Committee), its passage would depend on broader tax reform efforts.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Rep. Goldman, Craig A. [R-TX-12]
Cosponsors (6)
Rep. Haridopolos, Mike [R-FL-8], Rep. Biggs, Andy [R-AZ-5], Rep. Evans, Gabe [R-CO-8], Rep. Williams, Roger [R-TX-25], Rep. Jackson, Ronny [R-TX-13], Rep. Hurd, Jeff [R-CO-3]
Recent Actions
- 2026-01-13: Referred to the House Committee on Ways and Means.
- 2026-01-13: Introduced in House
- 2026-01-13: Introduced in House
Bill Versions
- To amend the Internal Revenue Code of 1986 to eliminate the dollar limitations on the exclusion of gain from sales of principal residences, and for other purposes. — issued 2026-01-13 — PDF (2 pages)