Today a married couple can exclude up to $500,000 of gain on the sale of their primary residence, and a single filer up to $250,000. The More Homes on the Market Act would double those limits to $1 million and $500,000, but as of November 4, 2026 it is a proposal sitting in committee, not law.
In Newport Beach and Corona del Mar, that gap is not academic. Plenty of long-time owners are sitting on gains well past $500,000. For them, the exclusion is a big part of the decision to sell or stay.
Watch on YouTube: Will the Home Sale Capital Gains Exclusion Increase to $1 Million?
What is the current capital gains exclusion on a home sale?
Under current federal law (IRS Tax Topic 701), you can exclude up to $250,000 of gain, or $500,000 if married filing jointly, when you sell your main home. To qualify:
- You owned the home for at least 24 months out of the five years before the sale.
- You lived in it as your main home for at least 24 months out of those five years.
- You have not used the exclusion on another home sale in the prior two years.
For married couples, only one spouse has to meet the ownership test, but both have to meet the residence test to get the full $500,000 (IRS Publication 523). Those dollar limits have not changed since 1997.
What would the More Homes on the Market Act change?
The bill, H.R.1340, was introduced on February 13, 2025 by Rep. Jimmy Panetta of California. A Senate version, S.3332, was introduced by Sen. John Cornyn of Texas on December 3, 2025. As written, it would:
- Raise the exclusion from $250,000 to $500,000 for eligible single filers.
- Raise it from $500,000 to $1,000,000 for eligible married couples filing jointly.
- Index those limits to inflation going forward.
- Apply only to sales after the bill becomes law.
It has support from both parties. As of late October, Inman reported 159 House cosponsors and 25 Senate cosponsors. It also reported that neither bill has moved past committee referral.
Why does the exclusion matter so much in Newport Beach?
Because appreciation here outran the cap a long time ago. Take the Balboa collection at One Ford Road. The median CRMLS sale price was $1,969,500 in 2016 and $4,137,500 in 2026 so far. That spread is $2,168,000, more than four times the current $500,000 married-couple exclusion.
Coastal neighborhoods tell the same story. I wrote about it in why Corona del Mar homes hold their value. The longer you own, the more of your gain sits above the exclusion.
That is one reason long-time owners stay put. Orange County new listings from January through September were 27% below the pre-COVID average, per Steven Thomas, Reports on Housing. Tax exposure is not the only reason. But it comes up in nearly every conversation I have with long-time owners.
Does California follow the federal home sale exclusion?
Yes, today. California conforms to the federal $250,000 and $500,000 exclusion with the same two-out-of-five-year test. But California ties its tax code to the federal code as of a fixed date, which is now January 1, 2025, under SB 711 (FTB). A federal increase passed later would not automatically raise the California exclusion. Sacramento would have to act too. Ask your CPA how that would hit your state return.
Should you wait to sell until the bill passes?
No. Do not build a sale around a bill that has not left committee.
Here is how I walk clients through it:
- Know your real gain. Your cost basis includes what you paid plus qualifying improvements, per IRS Publication 523. Owners who remodeled often have a higher basis than they assume.
- Run the numbers both ways with your CPA: sell under today's limits, or wait and hope.
- Price in what waiting costs: another year of carrying costs, a market that can move either way, and the home you want to buy next going up too.
- If you need to move for life reasons, move. The tax tail should not wag the dog.
I have built and remodeled over 200 homes in Southern California. I know exactly which improvements add basis and value, and which ones do neither.
What should Newport Beach homeowners do now?
Get a real number on what your home is worth today so you and your CPA can see the gain. Start with a home valuation, read my notes on homeowner tax breaks, and check the 2026 Newport Beach outlook. When you are ready to talk timing, contact me.
Frequently asked questions
How much capital gains can I exclude when I sell my home in 2026?
Up to $250,000 if single and $500,000 if married filing jointly, if you owned and lived in the home for at least two of the five years before the sale (IRS Tax Topic 701).
Did the home sale exclusion increase to $1 million?
No. The More Homes on the Market Act (H.R.1340 and S.3332) would raise it to $1 million for married couples, but as of November 4, 2026 it has not advanced past committee referral.
When would the higher exclusion take effect if it passes?
As written, it would apply to home sales after the date the bill becomes law, with limits indexed to inflation.
Does California allow the same home sale exclusion?
Yes. California conforms to the federal $250,000 and $500,000 exclusion today. A future federal increase would not automatically apply in California, because the state conforms to the federal code as of a fixed date (FTB).
Should I wait to sell my Newport Beach home until the bill passes?
Not on the bill alone. There is no vote scheduled that I can point to, and waiting has its own costs. Run your actual gain with your CPA and decide on the full picture.
Notes on the data
This post is general information, not tax or legal advice. Talk to your CPA or tax attorney before you make a decision. Bill status is from Congress.gov and Inman as of late October 2026 and can change. The Balboa figures are medians of CRMLS closed sales (6 sales in 2016, 4 in 2026 through October 5) and are not the gain on any specific home. Basis, improvements, depreciation and ownership history change the real number for every owner. New listing data is from the public summary page of Steven Thomas, Reports on Housing, October 26, 2026.
