![Better](https://cdn.builder.io/api/v1/image/assets%2Fea37b90b89334a2ab1714e2159c75418%2Fe2da67fb77e4423989a8b49ac50cb0aa?{"fit":"thumb","width":100})
Legislation proposed this month to raise the federal capital gains tax exclusion for some homeowners could help increase the number of homes for sale in many markets.
The legislation, the Nest Egg Protection Act (H.R. 9064), could reduce or eliminate capital gains taxes for homeowners age 65 and older who have owned their primary residence for at least 25 years.
This bill targets one of the most overlooked forces behind the housing inventory shortage: millions of senior homeowners who built substantial equity over decades but face a tax bill large enough to make downsizing financially unattractive.
The bill has not yet passed, and current exclusion limits remain in effect. But its introduction, coming alongside a separate bipartisan bill proposing broader capital gains relief, signals growing Congressional attention to a tax-lock dynamic that has quietly kept a large pool of family homes off the market for years.
...in as little as 3 minutes — no credit impact
What the Nest Egg Protection Act proposes
The Nest Egg Protection Act (H.R. 9064) was introduced by Rep. Nicole Malliotakis (R-NY) on June 1, 2026. It proposes to temporarily raise the capital gains tax exclusion on the sale of a primary residence to $1 million for both single filers and joint filers, provided the seller is aged 65 or older and has owned the property as their primary residence for at least 25 years.
Under current IRS rules, single filers can exclude up to $250,000 in capital gains from the sale of a primary residence, and joint filers can exclude up to $500,000. Those thresholds were set by the Taxpayer Relief Act of 1997 and have never been adjusted. In the nearly three decades since, average home prices have roughly tripled. For many long-tenured homeowners, particularly in coastal metros and high-demand suburban markets, gains well above the current cap are now commonplace.
Important: The Nest Egg Protection Act is proposed legislation. It has not been signed into law. All references to what this bill "would do" or "could mean" describe provisions as proposed — not any change currently in effect. Consult a tax professional regarding your specific situation.
How this fits into a broader push to reform the exclusion
The Nest Egg Protection Act is one of several bills in the 119th Congress aimed at modernizing the home sale exclusion. Rep. Malliotakis is also a co-sponsor of the More Homes on the Market Act (H.R. 1340), a bipartisan bill introduced in February 2025 that would double the exclusion for all homeowners — not just seniors — and index it to inflation going forward.
The two bills take different approaches to the same underlying problem. H.R. 1340 is broader and inflation-indexed, which would prevent the exclusion from eroding again over time. The Nest Egg Protection Act is narrower and more targeted, applying only to the cohort of older homeowners with the longest tenure and, typically, the largest gains. The table below shows how the proposals compare:
| Current law | Nest Egg Protection Act (H.R. 9064) | More Homes on the Market Act (H.R. 1340) | |
|---|---|---|---|
| Who qualifies | All primary homeowners | Homeowners 65+ who've owned 25+ years | All primary homeowners |
| Single filer exclusion | $250,000 | $1,000,000 | $500,000 |
| Joint filer exclusion | $500,000 | $1,000,000 | $1,000,000 |
| Inflation-indexed? | No — frozen since 1997 | No — temporary measure | Yes — adjusts automatically |
| Status | In effect | Proposed — not law | Proposed — not law |
Both bills are proposed legislation. Neither has passed. Current law limits remain in effect.
Why seniors specifically are the key to unlocking inventory
Baby boomers, those born roughly between 1946 and 1964, own a disproportionate share of the nation's housing stock. Many purchased their homes in the 1980s, 1990s, or early 2000s and have watched values compound for decades. According to recent housing data, the average sale price of a typical U.S. home has roughly tripled since 1997, rising from around $172,000 to over $514,000 as of early 2026.
For a homeowner who bought in a coastal market or established suburb in the late 1990s for $250,000, that home may now be worth $800,000 or more. Their total gain could be $550,000. After the current $500,000 joint exclusion, $50,000 of that gain is potentially taxable. For a single filer on the same property, the exposure is larger: The $250,000 exclusion would leave $300,000 potentially subject to capital gains tax at 15% or 20%, depending on income.
Example is for illustrative purposes only. Rates, payments, and total interest will vary based on credit profile, loan terms, and market conditions.
Many seniors in this position choose not to sell. The result is what economists call the tax lock-in effect. Homes that could be listed remain off the market because the cost of selling is too high. This compounds the better-known rate lock-in effect, where homeowners who secured mortgages below 4% face a steep payment increase if they sell and buy again at today's rates.
The Medicare IRMAA complication
There's a further disincentive for senior homeowners that rarely gets discussed: the Medicare Income-Related Monthly Adjustment Amount, or IRMAA. Medicare looks back two years at income to calculate premium surcharges. A large capital gain from a home sale, say, $300,000 above the exclusion, can show up as unusually high income in a single year, triggering elevated Medicare Part B and Part D premiums for the following two years. For seniors already managing fixed income, that is another financial reason to delay selling, even when the practical desire to downsize is there.
What kinds of homes would come to market?
Homes owned for 25+ years in established neighborhoods. Three- and four-bedroom family homes in suburbs and mid-sized metro areas. Starter and move-up homes in high-demand markets where long-term owners have held for decades. These are precisely the homes that buyers at the first-time and move-up level have been competing over in a market defined by thin supply. The inventory that the Nest Egg Protection Act is designed to unlock is not luxury product. It is the foundational middle of the market.
What buyers can do right now while the bill is pending
Waiting for Congress to act is not a plan. Legislative timelines are uncertain, and housing market conditions shift independently of any single policy change. Buyers who prepare now will be better positioned whenever inventory does improve — from this bill, from H.R. 1340, from rate normalization, or simply from natural turnover.
Get your financing in order before you need it. Getting a pre-approval before you find the right home means you can move quickly when something appears, particularly important in markets where listings attract multiple offers. Better's fully online process delivers a pre-approval in minutes without affecting your credit score.
Look at markets where the tax lock-in effect is weaker. In parts of the Midwest and Southeast where home price appreciation has been more moderate, fewer owners face gains above the current caps. These markets tend to have relatively more available inventory and less competition per listing.
Consider new construction. Builders aren't subject to the capital gains lock-in dynamic. In markets where building has remained active, new construction provides an alternative to the constrained existing-home supply. See our full guide on the steps to buying a house for a complete walkthrough of the process.
Know your budget at today's rates. Use a mortgage calculator to run payment scenarios at current mortgage rates — not the rates from two years ago. Knowing your number removes guesswork from the decision.
...in as little as 3 minutes — no credit impact
What this means if you're a senior homeowner thinking about selling
If you are 65 or older and have owned your home for many years, a few considerations apply regardless of what happens with H.R. 9064 or H.R. 1340.
Start by confirming your actual gain. Your taxable gain is not simply the difference between your purchase price and today's value. Capital improvements — renovations, additions, a new roof — can be added to your tax basis, which reduces the gain. Many long-term owners have more basis-building than they realize after decades of maintenance and improvement.
Verify your eligibility for the current Section 121 exclusion. You must have owned and used the home as your primary residence for at least two of the five years before the sale. Certain life circumstances, such as health, divorce, job relocation, allow for a partial exclusion if the full two-year test isn't met.
If you're thinking about timing relative to Medicare, be aware of the two-year IRMAA lookback. A tax advisor can model the premium impact of a large home-sale gain and help you think through whether timing the sale differently changes your overall picture.
If you plan to sell and buy again, understand your financing options on the purchase side before you list. See our guide on selling your home with a mortgage for a complete walkthrough, and review the mortgage interest deduction guide to understand how homeownership tax benefits interact with your overall financial picture.
This article does not constitute tax advice. Consult a qualified tax professional regarding your specific situation before making any financial or selling decisions.
Frequently asked questions
What is the Nest Egg Protection Act?
The Nest Egg Protection Act (H.R. 9064) is a bill introduced in the House of Representatives on June 1, 2026 by Rep. Nicole Malliotakis (R-NY). It would temporarily raise the federal capital gains tax exclusion on home sales to $1 million for homeowners aged 65 or older who have owned their primary residence for at least 25 years. The bill has not yet passed and is not currently law.
How is the Nest Egg Protection Act different from the More Homes on the Market Act?
The More Homes on the Market Act (H.R. 1340) proposes to double the exclusion for all homeowners, regardless of age, to $500,000 for single filers and $1 million for joint filers, with automatic inflation adjustments. The Nest Egg Protection Act is narrower: it applies only to homeowners 65 or older with 25+ years of primary residence ownership, but sets the exclusion at $1 million for both single and joint filers. Both bills are pending and have not passed.
I'm 68 and have lived in my home for 30 years — would the Nest Egg Protection Act lower my taxes if I sell?
Based on the bill as proposed, you would meet the age and ownership requirements. Whether it would materially reduce your tax liability depends on the size of your gain. If your gain is below the current $250,000 (single) or $500,000 (joint) limit, you likely owe nothing under current law regardless. If your gain exceeds those limits, the bill, if enacted, could reduce or eliminate the tax on the overage. A tax professional can calculate your specific exposure. The bill has not yet passed.
Why don't more seniors sell their homes even when they want to downsize?
Two main financial forces work against it. First, the tax lock-in effect: seniors who have built large gains above the current exclusion caps face a significant capital gains tax bill if they sell. Second, the rate lock-in effect: many seniors locked in mortgages at 2–4% and face a steep payment increase if they buy again at today's rates. For some, a third factor applies: the Medicare IRMAA surcharge, which can temporarily raise Medicare premiums after a high-income year that includes a large home-sale gain.
If this bill passes, when would buyers actually feel the inventory impact?
Housing economists suggest inventory effects would take six to eighteen months to materialize after enactment. The impact would be strongest in high-appreciation markets where the most owners have gains above the current caps. Buyers should not plan around a specific timeline but should be prepared to move quickly when listings appear.
What is the current capital gains exclusion on home sales and who qualifies?
Under IRS Section 121, homeowners who have owned and lived in their primary residence for at least two of the five years before selling can exclude up to $250,000 in capital gains (single filers) or $500,000 (joint filers). Gains above those amounts may be subject to capital gains tax at 0%, 15%, or 20% depending on income, plus a potential 3.8% net investment income tax for higher earners. These limits have been in place since 1997.
What can first-time buyers do while inventory is still constrained?
Start with financing. Getting pre-approved for a mortgage puts you ahead of buyers who wait until after finding a home. See our guides on how to qualify for a home loan as a first-time buyer, tips for first-time home buyers, and available first-time homebuyer tax proposals for 2026 for a full picture of what to prepare.
Is the Nest Egg Protection Act likely to pass?
It is too early to tell. The bill was introduced June 1, 2026, and is in early legislative stages. Legislative outcomes are uncertain. Buyers and sellers should plan around current market conditions rather than waiting on any specific bill to pass.
The bottom line
The Nest Egg Protection Act puts a specific number on a problem that has gone unresolved for nearly three decades: a capital gains exclusion frozen in 1997 while home values tripled. If enacted, the $1 million exclusion for senior long-term owners could remove one of the primary financial barriers to downsizing for the generation that holds the largest share of the nation's housing stock — and in doing so, release a meaningful supply of homes that buyers have been waiting years to see.
Both the Nest Egg Protection Act and the More Homes on the Market Act are pending. Neither is law. But the pattern they represent, a growing bipartisan push to address inventory through tax reform, is worth tracking closely. Buyers who are prepared will always have the edge over buyers who are waiting.
...in as little as 3 minutes — no credit impact