Trump Administration Mulls Capital Gains Tax Reforms Ahead of Midterms

President Donald Trump is reportedly considering two related changes to the capital-gains tax code as part of the 2026 midterm agenda. The first would index long-term capital-gains rates to inflation, allowing investors to adjust the original purchase price for price-level changes before calculating tax. The second would broaden the exclusion for gains on the sale of a primary residence to homes valued at $2 million or less, up from the current $250,000 (single) and $500,000 (married) limits. Both ideas were discussed on Fox Business by National Economic Council Director Kevin Hassett and former council head Larry Kudlow.

CNBC

Current law permits homeowners to exclude up to $250,000 (or $500,000 for married couples) of gain on the sale of a primary residence, a limit unchanged since 1997. The Republican Study Committee and several senators have floated similar reforms, but no legislation has advanced. Indexing capital gains to inflation has been examined in prior administrations; scholars note that unilateral implementation would likely face court challenges.

Trump administration considers real estate capital gains tax cut

“He wants to hit people with the things that are promises that we’re going to do if the Republicans have power in the future,” — Kevin Hassett. Larry Kudlow said the president is “very interested” in both indexing gains and expanding the exemption, adding that “I spoke to him, he liked the idea of the indexing, he liked the idea of a bigger exemption.” White House spokesman Kush Desai responded by email that any formal announcement will come directly from the administration.

Bloomberg

Financial-planning experts warn the proposals could worsen fiscal strain. Carolyn McClanahan, founder of Life Planning Partners, argued that “floating more tax cuts when the government is spending like crazy isn’t a good move.” Certified Financial Planner Carolyn noted that “most middle- and lower-income people are not impacted by the exclusion rate, and most do not have investments that would incur capital gains taxes.” Louisiana-based planner Jude Boudreaux said congressional action before the November election is “just based on how difficult it seems to be to get any legislation passed recently.”

CNBC

• Deficit magnitude: ITEP quantifies a near-$1 trillion addition, while Bloomberg’s coverage does not provide a specific figure.

Institute on Taxation and Economic Policy (ITEP)

• Public support: Polls differ sharply—61 percent say the rich don’t pay their fair share (Pew), yet 82 percent back indexing the exemption (American Property Owners Alliance).

New Republic

The administration has not announced a formal policy, and any rollout will depend on the composition of the 118th Congress and the administration’s ability to align the reforms with its broader fiscal agenda.

Bloomberg