Home Sale Tax Exclusion for Sellers 65 and Older: Should You Wait for the $1 Million Bill?

A House bill would raise the home-sale tax exclusion to $1 million for sellers 65 and older who have owned their home 25 years. It is only a proposal. Current law still excludes $250,000 of gain for one seller and $500,000 for a married couple. Do not delay a sale you need because of a bill that has not moved.

This guide is for downsizers and empty nesters who have owned a home for decades and are weighing a sale. It explains the proposal, shows what it could save in a worked example and sets out how to decide when to sell. Midlife Simplicity does not give tax or legal advice, so confirm your own numbers with a tax professional.

What Does the Nest Egg Protection Act Propose?

Representative Nicole Malliotakis of New York introduced H.R. 9064, called the Nest Egg Protection Act, on June 1, 2026. Her press release says the bill would lift the exclusion to $1 million for individuals and married couples. The seller must be 65 or older and must have owned the primary residence for at least 25 years.

The increase would be temporary, though the release gives no end date. Another report says supporters include local real estate boards, who call it a way to get more homes onto the market. The bill is one of several ideas aimed at the same problem.

HousingWire reports that the bill had only been introduced, with no committee action mentioned. Similar bills have been filed before and have not become law. That history is the main reason to plan around today's rules.

What Does Current Law Allow?

The Internal Revenue Service (IRS) says you can exclude up to $250,000 of gain from the sale of your main home, or $500,000 on a joint return. You must meet an ownership test and a use test. You need to have owned and lived in the home for at least 24 months of the five years before the sale, according to IRS Topic 701.

You generally cannot claim the exclusion if you excluded gain on another home sold within the prior two years. You must also report the sale if you receive Form 1099-S or if any gain is taxable. The IRS points readers to Publication 523 for full rules and exceptions.

The limits are old. They were set in 1997 and have not been adjusted for inflation. NAR data cited by HousingWire says 29 million homeowners, or 34%, could face capital gains tax under today's exclusion, a number projected to reach 59 million by 2035.

How Much Could the Proposal Save You?

Here is a worked example with simple numbers. A couple bought their home in 1995 for $180,000. They spent $70,000 on a new roof, kitchen and windows over the years. They sell for $850,000 and pay $50,000 in selling costs.

Their adjusted basis is $250,000, which is the purchase price plus improvements. Their net sale price is $800,000 after selling costs. The gain is $550,000.

The 15% rate is an illustration. Many sellers pay 0%, 15% or 20% depending on income, and some also owe the 3.8% net investment income tax. State taxes can add more.

The single seller in the example is the one with the most to gain. A widow or widower who has held the home for decades may face a bill that a couple would not. This is why the proposal draws interest from older owners.

Should You Wait to Sell Because of the Bill?

Usually not. The bill has no committee action reported, and the market is not waiting. Existing-home sales have run below a four-million annual pace, and mortgage rates have hovered above 7%, according to October market reports. Waiting means carrying a home you may not want while the price and tax rules stay uncertain.

The decision turns on your own gain. If your gain sits below the current exclusion, the bill does not matter to you. If it sits well above, the bill could matter, but only if it passes and applies to your sale year.

Think in terms of cost and probability. If waiting a year costs you $15,000 in carrying costs and the bill has a low chance of passing, the math rarely favors waiting. A counterpoint is fair. If your gain is only slightly above the exclusion and you do not need to move soon, a short delay costs little.

How Do You Estimate Your Own Gain?

Start with your basis. Basis is what you paid for the home, plus the cost of major improvements. Routine repairs, such as repainting, do not count. A new roof, an addition and a replaced furnace usually do.

Then subtract selling costs, such as agent commissions and transfer fees, from the sale price. The result minus your basis is your gain. Compare it with $250,000 or $500,000.

Records matter here. Many owners lose receipts over 20 or 30 years. Our paper-sorting plan for downsizers explains which home records to keep, because improvement receipts can reduce your tax bill.

If you cannot find a receipt, look for other proof. Bank statements, contractor invoices and permit records can all help. A tax professional can tell you what the IRS will accept.

What Can You Do Now to Lower the Bill?

Several steps are available under current law. Each one has limits, so check them with a professional.

Income timing deserves attention. A year with lower income may place part of your gain in a lower bracket. Retirement is often a good moment, since wages have stopped but required withdrawals have not begun.

Our guide to capital gains tax when selling the family home in 2026 covers the basics, including how to report the sale.

What Should You Ask a Tax Professional?

Bring your numbers and a short list of questions. A one-hour meeting costs far less than a mistake on a six-figure sale. Ask how your state treats the gain, since some follow federal rules and others do not.

Ask whether a partial-year move or a recent spouse's death changes your exclusion. A surviving spouse may still claim the $500,000 limit if the sale happens within two years of the death and other conditions are met. That rule is easy to miss and can be worth tens of thousands of dollars.

Finally, ask what records the professional wants. Gather the closing statement from the original purchase, improvement receipts and your current mortgage payoff figure before the meeting.

What About Leaving the Home to Your Heirs Instead?

This is the other side of the choice. Under current law, heirs generally receive a "stepped-up" basis, which resets the home's tax basis to its value at death. That can erase decades of gain for the heirs.

It is not a reason to keep a home you cannot manage. Safety, maintenance costs and your own life matter more than a tax rule. Still, ask an estate attorney how the step-up would work in your case.

The trade-off is real. Selling now gives you cash and freedom. Holding gives your heirs a possible tax advantage. Weigh both against your needs, not just the tax.

How Does the Market Affect Your Timing?

Sales have been slow, and inventory has reached its highest level in several years, according to NAR figures reported in October. Buyers have more leverage. That affects your price more than any tax bill that has not passed.

Our guide to whether to sell now or wait until spring looks at the seasonal trade-offs. A spring listing may draw more buyers, but it also means another winter of costs. Run both numbers.

At Midlife Simplicity, we suggest working backward from your move date. Decide when you want to be in your next home, then plan the listing, the closing and the move around that date.

Your Next Step

Write down three numbers this week: your estimated sale price, your adjusted basis and your selling costs. Subtract to find your gain and compare it with the current exclusion. Then ask a tax professional whether any part would be taxable.

Midlife Simplicity will follow H.R. 9064 and update this guide if it moves. Until then, make your plan under the law that exists today.

✻ This guide is part of our Selling series. One small job a week arrives in Sunday Notes, with nothing to sell you.