American Dream Act

Seniors aged 65 and older would pay zero federal income tax on profits from selling a home priced at $500,000 or less to a first-time buyer. This could save sellers tens of thousands of dollars in capital gains taxes, making it much more financially attractive for older homeowners to downsize or move. The tax break replaces the existing Section 121 exclusion for qualifying sales, so seniors get a full exclusion on gains rather than the standard $250,000/$500,000 cap.

First-time homebuyers benefit indirectly because this tax break gives seniors a reason to sell specifically to them rather than to investors or repeat buyers. More homes hitting the market for first-time buyers could help ease competition in the under-$500,000 price range, which is where many starter homes fall. However, buyers must sign a legal statement under penalty of perjury confirming they've never owned a home and will use it as their primary residence.

Small-scale landlords or property owners aged 65+ who own real property valued under $500,000 could benefit from this tax exclusion when selling to a first-time homebuyer. This creates a new tax-free exit strategy for older small property owners looking to liquidate real estate holdings.