Billionaires Income Tax Act

Summary

Imposes new annual taxation on unrealized gains and other tax-preferred strategies used by very wealthy taxpayers by applying a mark-to-market approach, limits borrowing to avoid current tax, and closes the estate "step-up" loophole that lets heirs sell inherited appreciated assets tax-free. It also changes special tax rules: allows limited carrybacks for marked-to-market losses, expands application of the 3.8% net investment income tax for affected taxpayers, tightens expatriation tax rules for covered former citizens, and restricts like-kind exchanges and certain tax-free transfers for entities under specified notices. Many substantive changes take effect for taxable years beginning after December 31, 2025.

• Imposes annual mark-to-market taxation on unrealized appreciation for high-income/high-net-worth taxpayers to limit the "buy, borrow, die" strategy.
• Closes the estate step-up loophole so inherited appreciated assets are less likely to be sold completely tax-free by heirs.
• Allows a three-year carryback election for net marked-to-market losses, with limits and ordering rules to coordinate with existing loss rules.
• Applies the 3.8% net investment income tax to affected taxpayers without the usual AGI threshold test for years they qualify as "applicable taxpayers."
• Tightens expatriation tax rules for covered expatriates who are also affected taxpayers, limiting certain elections and enforcing mark-to-market treatment during the 10-year period after expatriation.
• Prevents like-kind exchange nonrecognition (Sec. 1031) and alters certain Sec. 351 transfers for specified entities when particular notices are in effect.
• Most operative tax changes take effect for taxable years beginning after December 31, 2025.
• Contains detailed coordination rules so new treatments interact with existing carryforwards, partner/owner-level rules, and deferral-recapture provisions.