Georgia’s homeowners have seen significant gains in property values over the past two decades—but many are now finding that those gains come with an unexpected catch.
A federal tax rule that hasn’t been adjusted since 1997 is quietly putting more than 1 in 3 Georgia homeowners at risk of owing capital gains taxes when they sell.
According to the National Association of REALTORS, 31.3% of homeowners in Georgia exceed the $250,000 capital gains exclusion for individuals. Another 5.5% are over the $500,000 limit for married couples filing jointly. And with prices continuing to rise in metro areas like Atlanta, Savannah, and Athens, the number of homeowners affected is likely to grow.
Equity gains, tax pains
The current law allows sellers to exclude $250,000 in profit if filing singly or $500,000 jointly when selling their primary residence. But those thresholds were set in 1997 and haven’t been updated for inflation. Since then, home values have increased more than 260% nationwide.
If the exemption had kept up with inflation, it would now be $660,000 for individuals and $1.32 million for couples. Instead, many Georgia sellers are surprised to learn that decades of appreciation—much of it gained simply by staying put—now puts them above the limit.
Georgia also taxes capital gains as regular income, with rates up to 5.75%. When combined with federal capital gains tax, the impact can add up quickly, especially for those planning to use their equity to fund retirement or other major life changes.Homeowners Face a Stiff Penalty for Staying in Their Homes Too Long—a Hidden Home Equity Tax
Georgia’s regional standing
Among Southeastern states, Georgia’s 31.3% exposure is higher than in neighboring Alabama (13.4%) and Mississippi (7.9%), but still well below Florida’s 47.8%. Still, it reflects hundreds of thousands of homeowners now in the tax danger zone—particularly in fast-growing counties like Fulton, Cobb, and Gwinnett.
Many of these sellers aren’t wealthy. They’re longtime owners who’ve benefited from the state’s population growth and housing demand. Now they’re discovering that capital gains taxes on real estate may take a sizable bite out of the profits they’d hoped to reinvest.
And that realization is having market-wide effects. As owners hesitate to sell due to the tax bill, inventory tightens. Fewer homes hit the market, and prices continue climbing—a dynamic housing experts call the “stay-put penalty.”
What’s coming by 2035
The issue won’t fade on its own. By 2035, the NAR projects that 76.2% of Georgia homeowners will exceed the $250,000 cap, and 28.9% will go beyond the $500,000 mark.
This growing tax risk is expected to keep inventory low, particularly in areas where home prices are appreciating quickly. The longer the exemption limits go unchanged, the more middle-income homeowners will be affected.
It’s already contributing to what economists describe as a freezing housing market, where people stay in place—not because they want to, but because they can’t afford the tax hit.
A legislative proposal to ease the pressure
To address the issue, housing advocates support the More Homes on the Market Act. The bipartisan bill would double the exclusion limits and index them to inflation going forward.
“Equity shouldn’t be a trap,” says Shannon McGahn, chief advocacy officer at the National Association of REALTORS®. “It should be a stepping stone for the next chapter”.
In the meantime, Georgia homeowners considering a sale should speak with a tax professional and learn more about how the capital gains tax applies to home sales. With planning, many can reduce their exposure—and keep more of what they’ve earned.
