There is no federal home equity tax, and the leading home equity tax proposal in Congress would apply only to households with a net worth of $100 million or more. If you own a typical home, none of the current proposals would touch you. Federal law still taxes home-sale profit only when you sell, and it shields the first $250,000 of gain (or $500,000 for a married couple filing jointly) from tax entirely.
What Has Actually Been Proposed
Two proposals drive most of the conversation. Neither has become law.
The first is the Billionaire Minimum Income Tax, which has appeared in presidential budget requests starting in 2023. It would require covered households to pay a minimum tax of at least 20 percent on their total economic income, counting both ordinary taxable income and the annual increase in the value of assets they haven’t sold. Tax already paid through other provisions during the year would count toward the minimum, and any shortfall would be owed as an additional payment. Payments could be spread across five-year installments, and if asset values later fell, installment obligations could be reduced or refunded.
The second is the Billionaires Income Tax Act, most recently introduced in the Senate as S.2845 in the 119th Congress. It was referred to the Senate Finance Committee in September 2025 and has not advanced.1Congress.gov. S.2845 – Billionaires Income Tax Act 119th Congress (2025-2026) This version treats real estate differently from stocks. Publicly traded assets would be marked to market each year, with gains taxed annually. Harder-to-value assets like homes, land, and closely held businesses would not face annual taxation. Instead, when the owner eventually sells, they would owe an interest-based charge on top of the regular capital gains tax to account for the years of deferred liability.
So even under the Senate version, a home would not be taxed year by year on its rising value. The added charge would come only at sale, and only for taxpayers who cleared the wealth threshold.
Who Would Actually Be Affected
The Billionaire Minimum Income Tax targets households with a net worth above $100 million. It phases in between $100 million and $200 million, so a household worth $120 million would face a smaller obligation than one worth $300 million. By all available estimates, this threshold captures fewer than roughly 0.01 percent of American households.
The Senate bill sets the bar higher still. It applies to individuals who either earned $100 million in a single year or held a net worth above $1 billion for three consecutive years.
If your primary asset is your house and your total net worth is below nine figures, none of these proposals are aimed at you. A homeowner sitting on a few hundred thousand dollars of equity is not within the same order of magnitude as the intended targets.
Why Homes Are In the Conversation At All
Both proposals are aimed at a planning pattern sometimes called “buy, borrow, die.” A wealthy individual buys assets that appreciate over decades but never sells them. Instead of selling and triggering a taxable gain, they borrow against the appreciated value. Loan proceeds aren’t taxable income, so the borrower gets cash without a tax bill. When the owner dies, heirs receive the assets at current market value under the stepped-up basis rule, and all the accumulated gain escapes income tax permanently.2Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent
Real estate is one of the assets that pattern uses, which is why homes appear in the drafting. The design of the proposals reflects that: the point is to reach very large fortunes that hold appreciated property, not to reach ordinary residential equity.
The Constitutional Question Hanging Over Any Version
Even if Congress passed one of these bills, its legality would be immediately challenged. The Sixteenth Amendment gave Congress the power to tax “incomes,” and there is a long-running debate over whether an increase in the value of something you still own counts as income.
The Supreme Court had a chance to answer that in Moore v. United States (2024) and declined. The Court upheld a one-time tax on overseas corporate earnings attributed to American shareholders but stressed the ruling was narrow, and the majority opinion said it was “not address[ing]” whether Congress can tax unrealized gains on individual holdings, wealth, or net worth.3Supreme Court of the United States. Moore v. United States, No. 22-800 (2024)4Congress.gov. Supreme Court Declines to Decide Whether Sixteenth Amendment Requires Realization Until the Court squarely rules on realization, the legal viability of any unrealized-gains tax is an open question.
How Your Home Sale Is Taxed Right Now
For nearly every homeowner, the rule that matters is Section 121 of the Internal Revenue Code. When you sell your primary residence, you can exclude up to $250,000 of profit from taxable income. Married couples filing jointly can exclude up to $500,000.5Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence Those amounts have not been adjusted for inflation since the exclusion was enacted in 1997, and they stay at those levels for 2026.
To qualify, you need to pass two tests. The ownership test requires you to have owned the home for at least two of the five years before the sale. The use test requires you to have lived in it as your main home for at least two of those same five years. For married couples filing jointly, only one spouse needs to meet the ownership test, but both spouses must independently meet the use test.6Internal Revenue Service. Publication 523 (2025), Selling Your Home Time away on vacation still counts toward your residence period, and if you moved into a licensed care facility, you only need 12 months of residence instead of 24.
Gain above the exclusion is taxed as a long-term capital gain if you owned the home for more than a year, at federal rates of 0, 15, or 20 percent depending on your taxable income. A separate 3.8 percent Net Investment Income Tax can apply if your modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly). The Section 121 exclusion reduces your gain before that surtax is calculated, so only the amount above $250,000 or $500,000 is potentially subject to it.7Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
Your Cost Basis Determines the Gain
How much profit you actually made depends on your cost basis. It starts with what you paid for the home, including closing costs like recording fees, legal fees, and real estate taxes you assumed from the seller. From there, every capital improvement raises the basis: a new roof, a kitchen renovation, an added bathroom, central air conditioning, a paved driveway, a new deck.8Internal Revenue Service. Publication 551 – Basis of Assets Routine maintenance and repairs do not count.
When you sell, you subtract the adjusted basis from the sale price to find your gain. Keeping records of improvements matters, because a higher basis means a smaller taxable gain, whether you’re relying on the Section 121 exclusion or calculating tax on anything above it.
What Happens When a Home Passes at Death
If a homeowner dies and the property passes to heirs, the heirs take the home at its fair market value on the date of death, not the price the deceased originally paid.2Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent If a parent bought a home for $80,000 in 1985 and it was worth $450,000 at death, the heir’s basis is $450,000. If the heir later sells for $460,000, they owe capital gains tax on $10,000, not on the $370,000 of appreciation that built up during the parent’s lifetime.
This step-up in basis is the piece the unrealized-gains proposals aim to disrupt, and some versions would eliminate it for covered taxpayers by treating death as a taxable event on accumulated appreciation. Under current law, the step-up is available to everyone regardless of net worth.