Arizona bill seeks to end capital gains tax for home sales

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(The Center Square) - The Arizona state Senate Finance Committee advanced a bill to protect Arizonans selling their homes.

The panel approved Senate Bill 1633, introduced by state Sen. J.D. Mesnard, R-Chandler, which would eliminate the state’s income tax on capital gains from selling a home.

SB 1633 would not impose a tax penalty on long-term homeowners seeking to sell their homes.

Mesnard told The Center Square this week that he introduced the bill to address Arizona’s housing crisis.

He said he got the idea after listening to discussions about it on the federal level.

One of the ways to help Arizona’s housing market is to remove the “incentive to stay in your home solely because of the tax liability,” Mesnard said.

He added he doesn’t think taxing a person’s home is “appropriate.”

If the bill becomes law, Mesnard said it would have a positive effect on the state’s housing market.

When people do not face a tax liability for selling their home, it gives them “one more reason” to consider selling, the senator noted.

"Taxing gains on a primary residence can trap people in homes that no longer work for them," he said.

Mesnard added that capital gains taxes may prompt seniors to delay downsizing their homes or keep families in a house that no longer works for them.

“By removing this tax barrier, SB 1633 allows families to make decisions based on real life needs, not fear of a tax hit," Mesnard told The Center Square. "When someone sells their home, the state should not take a cut of the equity they worked years to build."

To qualify for the tax break, SB 1633 applies to homeowners who have lived in their primary residence for at least five years.

Regarding Arizona’s housing market, Mesnard said, “Houses are becoming harder to afford.”

He added it is more difficult to buy a home than it was 10 years ago.

In 2015, the median home price in Arizona was $265,000. In December 2025, the median cost had risen to $417,121. That's a 57% hike.  

Despite high prices, Mesnard said he thinks the state’s housing market is showing signs of improvement.