Trump’s “Third Tactic” to Pressure Powell on Rate Cuts? Trump Is Considering Removing Capital Gains Tax on Home Sales

TradingKey - On Tuesday, July 22, President Donald Trump said at the White House that his administration is considering eliminating the capital gains tax on home sales to boost the struggling U.S. housing market.

However, analysts suggest this proposal may be less about policy and more about applying political pressure on Federal Reserve Chair Jerome Powell to cut interest rates — marking what some are calling Trump’s “third lever” in his campaign for looser monetary policy.

A New Tax Cut Proposal?

On Tuesday, Trump responded to a Republican lawmaker’s proposal by saying the White House is actively exploring the idea of scrapping capital gains taxes on home sales — aimed at stimulating the housing market amid high mortgage rates.

Under current U.S. tax law, homeowners can exclude up to $250,000 in capital gains from the sale of a primary residence ($500,000 for married couples filing jointly). This exclusion has not been adjusted for inflation since 1997.

A recent study by the National Association of Realtors found that:

• 34% of American homeowners (about 29 million people) have enough home equity to exceed the $250,000 exclusion threshold
• 10% (around 8 million) could surpass the $500,000 cap

If enacted, eliminating this tax would be another major tax relief measure following Trump’s recently passed “Big Beautiful Bill.”

At the time of writing, the iShares U.S. Real Estate ETF (IYR) rose 1.22%, outperforming the S&P 500 (-0.20%) and Nasdaq (-0.28%).

Is This Real Policy — or Just a Message to Powell?

USA Today reported that eliminating the capital gains tax on home sales would require new legislation, which is unlikely to pass in the current political climate. That raises doubts about the plan’s feasibility.

Instead, Trump’s comments may be a strategic move — not to reform tax policy, but to amplify pressure on the Fed.

Trump said, “ If the Fed would lower the rates, we wouldn’t even have to do that.”

He reiterated that U.S. interest rates should be cut by three percentage points — or even more.

This marks the third time Trump has used a high-profile issue to push for rate cuts:

1. High Treasury interest costs — warning of unsustainable debt burdens
2. Fed headquarters renovation expenses — accusing Powell of fiscal mismanagement
3. Now, housing affordability — framing high rates as a threat to homeownership