1. United States
2. Mich.
3. Letter

The capital gains tax on the sale of a primary residence is severely impacting housing inventory by disincentivizing middle-class homeowners from selling and relocating. As home values have skyrocketed in recent years, many Americans cannot afford the hefty tax bill that would result from selling their property. This paralyzing effect has kept a significant number of existing homes off the market, exacerbating the nationwide supply shortage. The capital gains rules desperately need updating to account for rampant inflation since they were last modified. Adjustments must be made to reflect current realities and remove this burdensome financial barrier preventing the free flow of housing inventory. Revising the outdated capital gains structure would empower more sellers to list their homes without fear of overpaying taxes, helping to alleviate crunch conditions in the overheated market.