Increase of exclusion of gain from sale of principal residence

(a) In general Section 121(b) is amended— (1) by striking $250,000 and inserting $500,000 each place it appears, (2) by striking 500,000 and inserting $1,000,000 each place it appears, (3) in paragraph (2)(A), in the heading, by striking $500,000 and inserting $1,000,000, and (4) by adding at the end the following new paragraph: (5) Adjustment for inflation In the case of a taxable year beginning after 2026, the $500,000 and $1,000,000 amounts in paragraphs (1), (2), and (4) shall be increased by an amount equal to— (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 2025 for 2016 in subparagraph (A)(ii) thereof. If any increase under this clause is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.. (b) Effective date The amendments made by this section shall apply to sales and exchanges after December 31, 2025.