HR7400-119

What This Bill Does

The Making Homeownership Affordable Again Act amends Internal Revenue Code section 121. It strikes the current dollar-limit paragraphs for excluding gain from the sale of a principal residence, leaving the ownership and use framework but removing the fixed cap structure. It also modifies partial exclusion rules so a sale or exchange to a first-time homebuyer can qualify for partial exclusion treatment, and defines first-time homebuyer as an individual, and spouse if married, with no present ownership interest in a principal residence during the three years before the sale or exchange. The changes apply to sales and exchanges after enactment.

Who Benefits and How

Homeowners with large gains benefit most because the bill removes the fixed federal exclusion caps that can leave high-appreciation sales taxable. First-time homebuyers may benefit if sellers have a tax incentive to sell to them under the partial exclusion rule. Real estate agents and home sellers in high-cost markets may benefit from more tax-favored transactions.

Who Bears the Burden and How

IRS must administer revised section 121 rules, new first-time-homebuyer definitions, and transition treatment for sales after enactment. Federal taxpayers bear revenue loss from uncapped principal-residence gain exclusions and broader partial-exclusion treatment. Buyers who are not first-time homebuyers may be less attractive to some sellers when the partial-exclusion rule matters.

Key Provisions

• Repeals the fixed dollar caps in the section 121 principal-residence gain exclusion.
• Expands partial exclusion treatment to certain sales or exchanges made to first-time homebuyers.
• Defines first-time homebuyer using a three-year no-ownership lookback period for the buyer and spouse.
• Applies the changes to sales and exchanges after enactment.