For many longtime Southern California homeowners, deciding whether to sell isn’t as simple as asking, “Is this a good time?”
Sometimes the house itself has become part of the problem.
Someone may have purchased a home 30, 40, or even 50 years ago for a fraction of what it’s worth today. They may be ready to downsize, move closer to family, or transition to senior living. But after decades of appreciation, selling can come with a potentially significant capital gains tax consequence.
And an exclusion that hasn’t changed since 1997 may be contributing to the problem.
The $250,000 Exclusion Isn’t What It Used to Be
Under current federal law, homeowners who meet the requirements can generally exclude up to $250,000 of gain from the sale of a primary residence. For a married couple filing jointly, the exclusion can be as much as $500,000.
Those amounts may sound substantial.
But they were established nearly 30 years ago and were not indexed for inflation.
Here in Los Angeles and Ventura Counties, that’s particularly important. A homeowner who bought an ordinary Southern California home decades ago may have accumulated hundreds of thousands of dollars—or considerably more—in appreciation.
That doesn’t necessarily mean all of that appreciation is taxable. A homeowner’s tax basis, qualifying improvements, selling expenses and other circumstances can affect the calculation.
But for some longtime homeowners, the potential tax bill has become one more consideration standing between them and a move they might otherwise be ready to make.
Congress Is Considering a Change
The bipartisan More Homes on the Market Act proposes doubling the federal primary-residence capital gains exclusion.
If passed, the exclusion would increase from $250,000 to $500,000 for an individual and from $500,000 to $1 million for a married couple filing jointly.
The proposed amounts would also be adjusted for inflation going forward—something the existing limits have never done.
The legislation has attracted support from members of both parties, as well as the National Association of Realtors.
And I think a change like this could do some real good, particularly in high-appreciation areas like ours.
This Isn’t Just About Taxes
What I find particularly interesting about this issue is how a tax rule can influence a housing decision.
I’ve talked with longtime homeowners who are ready for something different. Maybe maintaining the house and yard has become too much. Maybe they would rather have a single-story home. Maybe they want to move to a senior community or be closer to their children and grandchildren.
They aren’t necessarily trying to “cash out” at the top of the market.
They’re simply ready for the next stage of their lives.
But when selling creates a significant tax consequence, staying put can start to look like the better financial choice—even when it may no longer be the best lifestyle choice.
Increasing the exclusion wouldn’t solve that problem for everyone. But for some homeowners, it could make the difference between feeling financially locked into a house and having the freedom to consider other options.
It Could Help Buyers, Too
There’s another side to this.
We continue to hear about the shortage of homes available for buyers, particularly homes in established neighborhoods.
Some of those homes aren’t coming onto the market because their longtime owners have compelling financial reasons not to sell.
If updating the capital gains exclusion makes it easier for some of those homeowners to move, it could also free up homes for the next generation of buyers.
That’s one reason I find this proposal so interesting.
It potentially helps the generation that has owned and cared for these homes for decades and the generation trying to buy them today.
What About Trust and Inherited Homes?
This is where the subject can become more complicated—and where families should be especially careful about making assumptions.
Selling a longtime family home during a parent’s lifetime and selling that property after it has been inherited can have very different tax consequences.
Inherited property may receive an adjustment in tax basis after a death. A homeowner selling a primary residence during his or her lifetime may instead be eligible for the primary-residence capital gains exclusion.
How title is held can matter. The death of a spouse can matter. Improvements made to the property over the years can matter. The timing of a sale can matter.
That’s why I don’t think families should make a decision based simply on something they’ve heard about capital gains or inherited property.
Sometimes the best answer may be to sell now. Sometimes there may be good financial reasons to wait.
The important thing is to understand the options before making the decision.
A qualified tax professional should advise you about your individual tax situation, while an experienced real estate professional can help you understand the property’s current value, likely selling costs, condition, marketability and the practical considerations involved in a sale.
Put those pieces together, and a family can make a much more informed decision.
Why This Matters So Much in Southern California
This isn’t an abstract issue in our local market.
The July 2026 median home price was $888,120 in Los Angeles County and $950,000 in Ventura County.
Think about what those values can mean for someone who purchased a home in the San Fernando Valley, Conejo Valley or Simi Valley decades ago.
The house they bought for what now seems like an amazingly small amount may have become one of their largest financial assets.
That’s wonderful—but it can also create complications when it’s time to sell.
The tax rules should recognize that a $250,000 gain today is very different from a $250,000 gain when the exclusion was established in 1997.
The Gross Number Isn’t the Number You Take Home
There’s another part of this conversation that I think is easy to overlook.
In real estate, we have a tendency to focus on the big numbers. We talk about what someone paid for a house, what it’s worth today, or what it ultimately sells for.
But the sale price isn’t the same thing as what you walk away with.
There may be a mortgage or other debt to pay off, costs associated with selling the property, improvements or repairs made in preparation for the sale, and potentially taxes. If you’re selling because you’re moving, there’s also the cost of whatever comes next.
I’ve seen people become very focused on achieving a particular sales price, only to be disappointed when they finally see what that number looks like after everything else is taken into account.
That’s why I prefer to look at the net as early as possible.
Whether I’m helping someone sell a longtime family home, downsize, or prepare a trust or inherited property for sale, I think it’s important to have a realistic idea of what the transaction may actually produce—not just the impressive number at the top of the closing statement.
The gross number may make the headline. The net number is the one that affects your next decision.
More Choices Would Be a Good Thing
No tax law should determine whether someone moves. But realistically, taxes are one of the factors people have to consider when making a major financial decision.
I like the idea of giving longtime homeowners more choices.
If someone loves their home and wants to stay there, wonderful.
But if they’re ready to downsize, move closer to family, transition to senior living, or simply start a new chapter, an outdated tax threshold shouldn’t unnecessarily stand in their way.
And if making that change also brings more homes onto the market for younger families trying to become homeowners, that’s a benefit worth considering too.
The More Homes on the Market Act is still proposed legislation. It has not become law, and the details could change as it moves through Congress.
But after nearly 30 years of Southern California home-price appreciation, I think updating the capital gains exclusion is a conversation worth having.
Sometimes a change really would do us good.
Have Questions About Your Next Move?
I’ve been having a lot of these conversations lately. If you’re wondering what today’s market means for your home, your plans, or your options, I’d be happy to help.
Janey Bishop
Broker | DRE #01838769
(818)570-1144
SRES, CPE, CPRES, RCSD
Senior Real Estate Specialist
Certified Probate Expert
Certified Probate Real Estate Expert
Real Estate Collaborative Specialist – Divorce
