Could Capital Gains Tax Cuts Lower Home Prices?
Could Capital Gains Tax Cuts Lower Home Prices? Two Proposals Are on the Table
Home prices in Naperville and the western suburbs of Chicago have remained strong, even as buyers face affordability challenges. One of the biggest factors behind this resilience is limited inventory. Many homeowners would like to move but feel financially constrained by capital gains taxes.
Two capital gains tax proposals are now being discussed at the federal level. Both are designed to reduce the tax burden on homeowners and encourage more listings. The question is whether these changes could actually lower home prices or simply create a healthier market balance locally.
Why Capital Gains Taxes Matter in Today’s Market
Capital gains tax applies when a homeowner sells a primary residence for more than they paid, above the current exemption limits.
Under today’s rules:
Single filers may exclude up to $250,000 in gains
Married couples may exclude up to $500,000 in gains
In many Naperville, Plainfield, Oswego, and Aurora neighborhoods, long term homeowners have seen appreciation well beyond those limits. As a result, selling can trigger a sizable tax bill, even if the move is driven by downsizing, retirement, or lifestyle changes.
This has kept many potential sellers on the sidelines, limiting inventory and keeping competition high for buyers.
Proposal One: Increasing the Capital Gains Exemption
One proposal would raise the exemption limit on gains from the sale of a primary residence.
If adopted, this could:
Reduce the financial friction of selling
Encourage long term homeowners to list
Increase resale inventory in established neighborhoods
In the western suburbs, this would likely mean more move up and downsizing activity rather than an oversupply of homes. Historically, this type of inventory growth leads to more balanced conditions, not sudden price declines.
Proposal Two: Indexing Capital Gains to Inflation
The second proposal would adjust capital gains calculations to account for inflation over time.
This change recognizes that not all appreciation represents true profit.
Potential effects include:
Fairer treatment for homeowners who purchased decades ago
Greater willingness to sell without feeling penalized
Gradual inventory growth rather than abrupt shifts
For many long term homeowners in Naperville and surrounding communities, this proposal could make selling feel more reasonable and financially manageable.
Would These Changes Actually Lower Home Prices?
Home prices typically decline when supply significantly exceeds demand. That dynamic is not present in the western suburbs.
Local demand remains strong due to:
Highly regarded school districts
Access to major employment corridors
Established neighborhoods with long term appeal
If capital gains tax changes increase inventory, the more likely outcome would be slower price growth, fewer bidding wars, and more balanced negotiations. That is a normalization of the market, not a correction.
What This Could Mean for Sellers
For homeowners who have delayed selling due to tax concerns, these proposals could create new flexibility.
This may be an opportunity to:
Reevaluate timing and goals
Consider downsizing or relocating
Plan proactively with tax and real estate guidance
In a more balanced market, correct pricing and thoughtful preparation become even more important.
What This Could Mean for Buyers
Increased inventory generally benefits buyers.
You may see:
More options in preferred neighborhoods
Less pressure to waive protections
More room for negotiation
Well priced homes in desirable areas will still attract strong interest, but buyers may be able to move forward with greater confidence.
Our Perspective
Policy changes can influence behavior, but local market fundamentals matter most. In Naperville and the western suburbs, capital gains tax relief could help unlock inventory without weakening home values.
Whether you are considering selling or planning a future purchase, understanding how potential tax changes intersect with your personal situation and local market conditions is essential. Thoughtful planning, supported by accurate data, continues to matter more than headlines.
Team Elite Realtors
Julia Corkey and Vickie Schoenfeld
Baird and Warner
Serving Naperville and the western suburbs of Chicago
Phone: 630 286 9777
Email: [email protected]
Website: www.homesbyteamelite.com
Office Location: Naperville, Illinois
With over 21 years of experience guiding buyers and sellers through the western suburban market, Team Elite provides clear advice, local insight, and steady representation through every stage of a move.
