Home values and property taxes skyrocketed in recent years, while property owner tax incentives diminished. Although owning a home remains a smart investment, it has become more of a burden on Americans.

In fact, the financial burden it places on current property owners trickles down to prospective and hopeful buyers. Current policies often discourage owners from selling, which reduces the number of homes on the market and further tightens supply in a historic housing shortage.

Federal tax policies used to give homeowners real relief, but they haven’t kept pace with inflation and the economy. It’s time to restore that support for Americans.

Property Tax Deductions

Policymakers can relieve the growing tax burden on owners and protect their hard-earned equity by increasing the cap on state and local tax (SALT) deductions.

SALT deductions allow taxpayers to deduct certain state and local taxes – such as property taxes – from their federal income tax, but the total deduction is capped at $10,000.

For single filers and married ones, the SALT cap applies equally, meaning married couples filing jointly can only deduct $10,000 total – or receive $5,000 if married and filing separately. Their single counterparts can receive $10,000 total.

This has created a “marriage penalty” for taxpayers as they receive a smaller deduction than others simply by being married.

As property values and corresponding taxes surge nationwide, more Americans find themselves constrained by the $10,000 cap. Congress should take action and adjust the SALT cap for inflation and double it for married couples, eliminating the existing “marriage penalty” and enhancing access to essential tax benefits for property owners.

Both Democrats and Republicans have vowed to raise the SALT cap. In the new year, policymakers from both sides of the political aisle can repeal the marriage penalty and adjust the cap to provide needed relief from rising property taxes.

Capital Gains Exclusions

What’s more, policymakers can further support property owners during the selling process. When it comes time to sell, households may qualify for substantial tax relief on the profit of the sale, known as capital gains exclusions.

The current capital gains exclusion amounts were set in 1997 and have not been adjusted since: $250,000 for single taxpayers and $500,000 for married couples filing jointly.

In those nearly 30 years, the cost of living in America has about doubled while average home prices have more than tripled, meaning property owners today pay significantly more in taxes on the profits of selling their home because of inflation and outdated policy.

To honor the intent of the tax relief, policymakers need to increase these exclusions and provide regular inflationary updates. Today, that looks like $489,744 for single taxpayers and $979,488 for married couples filing jointly.

This commonsense solution would restore to property owners the tax relief originally promised in 1997.

Let’s make sure Americans can access every dollar of equity they’ve worked hard to build.

Looking Ahead

Property owner tax dollars contribute to local schools, first responders, public parks, infrastructure and more. Owning property builds the foundation of strong communities and is a source of generational wealth.

As the new administration and Congress take shape in 2025, it’s critical they prioritize commonsense solutions that expand access to homeownership and protect its value for the American people.

By raising the SALT cap, increasing the capital gains exclusion amounts and restoring favorable property owner tax incentives across the board, we can put homeownership within reach for more Americans.

Sign up for The Alliance to stay informed on tax policy changes in 2025 and the ways you can advocate for the restoration of incentives that property owners deserve.

Related Posts

• 
  Homeownership is a Path to Build Equity – Let’s Keep it That Way
• 
  Take Advantage of New Energy Efficiency Tax Credits for Homeowners