Is It Really Unfair? A Closer Look at Capital Gains Taxes for Long-Time Homeowners

Lately, there’s been a lot of talk about how it’s "unfair" that longtime homeowners—especially seniors—are hit with taxes when they finally decide to sell. After all, you stayed put, took care of your home, and watched its value grow. So why should you be taxed when it’s time to move on?

June 2025 - Source: Realtor.com

Let’s take a step back and look at the full picture—because there’s more to this than meets the eye.

The U.S. Has One of the Most Generous Tax Breaks for Homeowners

First, here’s what most people don’t know:The U.S. is one of the only countries in the world that allows you to sell your primary residence and keep up to $500,000 of profit—completely tax-free (if you’re married and meet the 2-out-of-5-year rule). That number is $250,000 if you’re single.

In many other countries, any gain from selling your home is taxed, regardless of how long you lived there. Some allow exemptions, but few offer the level of flexibility and savings that Americans enjoy.

So while it may not feel like it in today’s market, the tax benefits we do have are still among the best available anywhere in the world.

Why It Feels Different Now

The problem isn’t the exclusion itself—it’s that the $250K / $500K cap hasn’t been updated since 1997. Meanwhile, home values have more than tripled in some areas.

So it’s not that the IRS is coming after you; it’s that your home has become a far more valuable asset than anyone imagined when these rules were written.

If the exclusion had kept up with inflation, it would be closer to $660,000 for individuals and over $1.3 million for couples.

Options You Might Not Know About

If you're concerned about taxes from selling your home, here are a few creative ways to keep more of your equity. Always consult with a CPA or financial advisor - and lean on your expert agent to help. If you’re a senior couple and already on a waitlist for senior living—or thinking about it—now may be the right time to rightsize together. As a couple, you’re likely eligible for the married capital gains exclusion, which allows you to keep up to $500,000 in home profit tax-free when selling your primary residence. That money could help you purchase a smaller, easier-to-manage home—or allow you to rent comfortably while waiting for your preferred unit to open up.

One option to consider is submitting your property at www.CashCPO.com. This process eliminates the need for signs or showings. Our team steps in to handle inspection repairs and light cosmetic updates that can maximize your home’s value—and when it sells, any additional profit flows back to you. (See #6 below)

It’s worth noting: only 1 in 8 seniors entering senior living are men. That means many women end up navigating this transition alone. When a spouse passes, the capital gains exemption drops to just $250,000 for the remaining partner.

Planning your move as a couple could mean preserving more of your home equity tax exemption, exactly when you need it most. Always consult your Tax advisor / CPA before making these important financial decisions.

1. Owner Financing

Instead of selling outright, you might allow the buyer to pay in installments. This way, you receive a large down payment (say $100,000), and the rest in monthly payments—spreading the tax burden over several years.

2. Rent First, Sell Later

If you rent out your home for two years before selling, it can be considered an investment property, giving you access to a 1031 exchange. That allows you to defer capital gains taxes by reinvesting in another property.

3. Home Improvements Can Help

If you’ve made improvements over the years—like new roofs, kitchens, HVAC systems—those expenses can increase your “cost basis” and reduce how much gain is considered taxable. Gathering receipts can really pay off.

4. Give to Family, the Smart Way

You can sell your home to a family member with owner financing or gradually gift part of the equity, helping them while reducing your tax exposure.

5. Charitable Giving

If you're already considering giving back, you can donate part or all of your home to a qualified nonprofit or donor-advised fund and potentially eliminate the capital gains tax entirely.

6. CashCPO process

Consider entering it at www.CashCPO.com and get a net sheet that shows you projections of the difference in profit from a Conventional sale, a Conventional CPO sale, and a CashCPO sale, all for free. 2/3 of homeowners make more money than with a conventional sale - receiving up to 70% as a first check, and then what the funding partner calls a 'waterfall check' once the team has gone in and fixed the average 40 items on the inspection report, and sometimes cosmetic improvements that can increase the home's value if there are comparable updated properties that sell for more in that area.

You’ve Done Well—Now Let’s Make the Most of It

Owning a home for decades is a tremendous achievement. Yes, today’s tax rules aren’t perfect—but they’re far more favorable than what most people around the world deal with.

The key now is planning. There are many ways to keep more of your equity, support your next chapter, and possibly help your family or community in the process.

If you’d like to talk through your options or learn how to structure your sale to minimize taxes, our expert agents would be honored to help. No pressure—just guidance based on what’s best for you. And - always consult your CPA / Financial advisor before making these important decisions.