I get this question more often than almost any other tax-related question these days. Usually it comes up at a kitchen table in Beverly, Salem, or Danvers, often with someone who has owned their home for 25 or 30 years and is starting to think about what comes next. And usually they've read a headline that said something like "Trump wants no tax on home sales" or "New bill would end capital gains on houses."

Those headlines weren't wrong, exactly. They just blurred the line between a proposal and a law. So let's straighten it out, and then talk about what this means for you if you're thinking about selling a long-held home on the North Shore.

One important note before we go further: I'm a real estate broker and educator, not a tax advisor. Nothing here is tax advice. What I can do is help you understand the landscape well enough to have a productive conversation with your CPA or tax attorney, which is exactly where this conversation belongs.

What the Law Actually Says Right Now

The rule that governs this is Section 121 of the Internal Revenue Code. It was created by the Taxpayer Relief Act of 1997, and it lets you exclude up to $250,000 of gain from the sale of your main home if you're single, or up to $500,000 if you're married filing jointly. To qualify, you generally need to have owned the home and lived in it as your primary residence for at least two of the five years before the sale. You can use it more than once in your lifetime, just not more than once every two years.

Here's the part that matters: those dollar limits have never been adjusted for inflation. A $500,000 exclusion went a long way in 1997. Today, on the North Shore, it can disappear quickly for someone who bought in the 1980s or 1990s.

Profit above the exclusion is taxed as a long-term capital gain at the federal level (0%, 15%, or 20% depending on your income), may be subject to the 3.8% Net Investment Income Tax for higher-income sellers, and is also generally taxable in Massachusetts. The IRS Publication 523 covers the federal rules in detail if you want to read them straight from the source.

Why People Think It Changed

There has been a lot of real activity on this issue, which is why the confusion is understandable. Here's where the major proposals stand as of mid-October 2026:

On top of the bills, administration officials have publicly floated ideas this year, including indexing capital gains to inflation and exempting home sales below a certain price. Floating an idea is not the same as changing the law. Any change to the home sale exclusion requires an act of Congress, and as of this writing, Congress hasn't acted.

Could that change? Yes. The More Homes on the Market Act in particular has drawn support from both parties and from the National Association of REALTORS®. But nobody can tell you when, whether, or in what form a change will pass, or whether it would apply to sales that have already closed. Most of these bills, as written, would only apply to sales after the law takes effect.

Why Long-Time North Shore Owners Are Most Exposed

Most homeowners in the country will never come close to the cap. But the people I work with most often are exactly the people most likely to exceed it: owners who bought decades ago in Beverly, Salem, Danvers, Marblehead, Manchester-by-the-Sea, Hamilton, Wenham, Ipswich, or Gloucester, watched their homes appreciate for 20 or 30 years, and are now thinking about downsizing, moving closer to family, or simplifying.

Let me show you how quickly the math adds up. The numbers below are hypothetical and round, just to illustrate the mechanics.

That second scenario is one I see often in my work with seniors and families handling estate sales. The rules around surviving spouses, inherited property, and basis adjustments are genuinely helpful in many cases, but they're nuanced, and the timing of a sale can matter. This is not a do-it-yourself area.

If you're curious what your home might sell for in today's market, a free North Shore home valuation is a good starting point. It gives you and your CPA a realistic sale price to work from, instead of a guess. You can also run rough numbers through our Seller Net Proceeds Calculator to see what you'd walk away with before taxes.

The Massachusetts Piece Most People Miss

Massachusetts generally conforms to the federal Section 121 exclusion, so the first $250,000 or $500,000 of qualifying gain is typically excluded on your state return too. Gain above that is generally taxed at the state's 5% rate for long-term capital gains.

Then there's the 4% surtax that Massachusetts voters approved in 2022, often called the "millionaires' tax." For 2026, it applies to Massachusetts taxable income above $1,107,750. Here's what catches people off guard: it's based on your total income for the year, including the taxable portion of a home sale. And the threshold is per tax return, so married couples filing jointly don't get a doubled threshold. For sellers at the upper end of the North Shore market, a single sale can push one year's income past that line. Whether it does, and whether anything can be done about it, is a question for your tax professional.

There's one more wrinkle worth knowing. Historically, Massachusetts has not always automatically matched federal changes to this exclusion. Back in 1982, the Massachusetts Department of Revenue confirmed that the state was keeping its older, lower limit even after Congress raised the federal one. If Congress does eventually raise or remove the federal cap, it's worth asking your CPA whether and when Massachusetts would follow.

Should You Wait for Congress?

I understand the temptation. If there's a chance the cap doubles next year, why not hold off? Here's my honest take after more than 25 years of helping people through these decisions: waiting on Congress is a bet, not a plan.

Nobody knows if a bill will pass, what the final version will look like, or when it would take effect. Meanwhile, your life keeps moving. Your health, your family's needs, the cost of maintaining a larger home, and the local market all keep changing too. I've seen people put a move on hold for a tax change that never came, and I've seen others sell and wish they'd known about a planning step that would have saved them money. The common thread is that the people with the best outcomes got good tax advice early, before they signed a listing agreement.

So my suggestion is simple. Make the decision that's right for your life, with real numbers in hand. Talk to your CPA about the tax side. Talk to me about the market side. Then decide.

If you're planning to buy your next home on the North Shore at the same time, it helps to have that piece mapped out too. A buyer consultation lets us coordinate both sides of the move so the timing works for you. And if you just want to see what's out there for your next chapter, you can browse current North Shore listings any time.

Frequently Asked Questions

Jim Armstrong

REALTOR® · SRES® · ABR® · GREEN · Massachusetts Certified Real Estate Instructor

Jim has been licensed in Massachusetts since 2000 and leads the Armstrong Field Group at Aluxety Real Estate. A lifelong North Shore resident who grew up in Danvers, lived in Salem for more than 30 years, and now calls North Beverly home, he specializes in helping long-time owners, downsizers, and families handling estate sales navigate complicated moves with clear information and a calm hand. His family's real estate roots go back to 1944, when his grandmother, Lillienne I. Field, founded Field Real Estate in Salem.