Report says CA homeowners benefit most if capital gains tax repealed, typical profit $332,000

CALIFORNIA – A new analysis by Redfin shows that California has the highest share of homeowners who would benefit from eliminating capital gains tax on home sales.

In 2025, about 62.3% of California homes have appreciated by at least $250,000, and 33% have gained over $500,000, making the state the most likely to benefit from proposed federal changes, according to Redfin.

California homes often exceed capital gains limits

Many sellers rely on the current federal capital gains exemption – $250,000 for singles and $500,000 for married couples, but soaring home values in California mean most exceed those thresholds.

The typical capital gain in California is roughly $332,659, potentially triggering tax bills of $50,000 or more, depending on income and other factors.

A bipartisan effort in Congress, including legislation introduced by Rep. Marjorie Taylor Greene called the No Tax on Home Sales Act, proposes fully eliminating the federal capital gains tax on profits from primary home sales.

Greene says the current $250,000 ($500,000 for joint filers) capital gains exclusion on home sales hasn’t been updated since 1997.

Redfin analysts say California homes often exceed capital gains limits due to high prices.

Strong job markets and desirable climates keep demand high, pushing median home prices above $1 million in cities like Los Angeles and San Francisco.

“On top of that, California’s Proposition 13—which can lock owners into low property-tax rates—has been a barrier for people to sell their homes. That means Californian homeowners typically stay in their homes longer than in other areas of the country, giving them more time to increase the size of their capital gain,” wrote the analysts.

Critics argue eliminating capital gains will mainly benefit the wealthy

President Donald Trump has publicly supported eliminating capital gains on home sales, calling it a way to “unleash” the housing market and reduce the tax burden on homeowners.

Although Redfin reports over 60% of California homes have appreciated more than $250,000, critics argue that eliminating or changing the capital gains tax overall – not just on home sales, would mainly benefit high-income earners.

They warn this could increase inequality and reduce federal revenue.

According to a 2018 Penn Wharton Budget Model analysis, 86% of the benefits would go to the top 1%, while the bottom 80% would receive just 1%.

For the No Tax on Home Sales Act to become law, it would need to pass both the House of Representatives and the Senate and be signed by the President. The timeline for such a legislative change is uncertain.