Homeowners who face a big tax bill when they sell their house could emerge as beneficiaries of a Trump administration plan to change how investment gains are taxed. Breathing new life into an idea that has been around for several decades, the Treasury Department is studying whether it can bypass congressional approval to index long-term capital gains to inflation. In simple terms, this would mean the appreciation in an asset's price that could be attributed to inflation would not be taxed. The change would cost an estimated $102 billion over 10 years, according to a Penn Wharton analysis done in the spring. It also would largely benefit the wealthiest of American households.

Secretary of the Treasury Steven Mnuchin testifies to the House Financial Services hearing on state of the international financial system on Capitol Hill in Washington, July 12, 2018. Joshua Roberts | Reuters

Nevertheless, homeowners whose houses have surged in value over the years could benefit from such a tax cut whether they are wealthy or not. "To some people, it might sound like a giveaway to the rich," said certified financial planner David Rae, president and founder of DRM Wealth Management in Los Angeles. "But here in Los Angeles and in some other places, a lot of homes that are worth $800,000 or $900,000 originally were bought for $100,000 or less several decades ago." While the national median price of homes sold is $231,700, according to Zillow, some hot markets come with much higher housing costs. For example, in California, that figure is about $603,000. In Washington, D.C., it's $535,500, and in New York, $568,300. Existing law already allows owners to exclude $250,000 (for singles) or $500,000 (for married couples) from capital gains taxation when the house is sold. However, it's easier to exceed those amounts in high-cost areas.

What you pay on long-term capital gains Tax rate Single taxpayers Married filing jointly Head of household 0% Up to $38,600 Up to $77,200 Up to $51,700 15% $38,600-$425,800 $77,200-$479,000 $51,700-$452,400 20% Over $425,800 Over $479,000 Over $452,400 Extra 3.8% Over $200,000 Over $250,000 Over $200,000

For illustration purposes: Say that in 2000, a single person in California paid $211,500 — the median price in that state at the turn of the century — for a house. In 2018, say it sells for the current median price of $603,000. Under current rules, the gain would be $391,500. After subtracting the $250,000 exclusion available to a single person, the seller would pay taxes on the remaining $141,500 gain. At the highest rate — 20 percent — that would mean a tax bill of $28,300. In contrast, if a portion of the $391,500 gain were attributed to inflation since 2000, the taxable share would be much lower.