If you're a longtime homeowner in Ladera Heights, Baldwin Hills, Windsor Hills, or Westchester, you already know what your home is worth — and you may also know the tax hit that comes with selling it. For many Southwest LA sellers, that looming capital gains bill has been reason enough to stay put, even when life says it's time to move.
That may be about to change.
The Problem: A 1997 Rule in a 2026 Market
The federal capital gains exclusion — capped at $250,000 for single filers and $500,000 for married couples — has never been adjusted for inflation since it was set in 1997. In a market like ours, where home values have climbed significantly over the past two decades, that cap leaves many longtime owners facing a tax bill on gains that are partly just inflation — not real profit.
The National Association of Realtors estimates that 29 million homeowners, or about 34%, could now exceed the $250,000 single-filer limit, and 8 million households could be above the $500,000 married couples limit.
What Congress Is Considering
Lawmakers on both sides of the aisle are pushing for reform. The bipartisan "More Homes on the Market Act" would double the exclusion limits to $500,000 for single filers and $1 million for married couples, and index those figures to inflation going forward. The bill currently has 94 cosponsors and is described as gaining "more and more momentum" in Washington.
Separately, members of Congress's Real Estate Caucus sent a letter to Treasury Secretary Scott Bessent urging that the basis of real estate be indexed to inflation, arguing that taxing these "phantom gains" discourages housing mobility, locks up supply, and penalizes long-term homeowners.
What It Means for Southwest LA Homeowners
Our market has seen real appreciation. Many sellers in the 90056, 90008, 90045, and 90043 zip codes are sitting on gains that exceed current exclusion limits — and that's keeping inventory tight for everyone.
According to Realtor.com senior economist Joel Berner, reducing the impact of capital gains tax would lead to an increase in homes for sale, more options for buyers at lower prices, and stronger overall sales activity.
Simply put: if this reform passes, more of our neighbors will feel financially free to sell. That means more choices for buyers and a healthier, more balanced local market.
Don't Wait on Washington to Make Your Move
Whether reform passes this year or not, there are strategies available right now to help you sell smart and keep more of what you've earned. With 32 years of experience serving Southwest LA, Icon Realty LA knows this market — and we know how to help you navigate a sale with maximum return.