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The bill reduces taxable capital gains for long‑term noncorporate investors by indexing basis for inflation (including some digital assets) but does so at the cost of added tax‑code complexity, greater recordkeeping and compliance burdens, uneven treatment for corporations, and new administrative and anti‑abuse uncertainties.
Long-term noncorporate investors (individual taxpayers, middle‑class families, small‑business owners, and investors) can reduce reported capital gains by indexing asset basis for inflation on assets held over 3 years, including tangible assets, C‑corp common stock, and qualifying digital assets.
Regulated investment companies (RICs) and REITs can apply the inflation adjustment at the entity level, which can better align pass‑through capital accounting with investor outcomes.
The bill uses the GDP implicit price deflator as the indexing measure, providing an objective, economy‑wide inflation benchmark that reduces disputes over which inflation measure to use.
Taxpayers face substantially increased tax‑code complexity because the proposal creates special, detailed rules (for partnerships, S corps, RICs/REITs, short sales, related parties, etc.), raising compliance, preparation, and possibly professional‑advice costs.
Taxpayers must retain original purchase documentation and meet complex recordkeeping requirements, increasing compliance burden and audit exposure (higher time and monetary costs).
Small businesses and owners converting to corporate form may be disadvantaged because indexing is limited to noncorporate taxpayers and excludes depreciation/amortization effects, producing mismatches and potential planning distortions.
Based on analysis of 2 sections of legislative text.
Allows non‑corporate taxpayers holding eligible assets >3 years to use an inflation‑adjusted basis (GDP deflator) when computing capital gain or loss for assets bought after Dec 31, 2025.
Introduced March 5, 2025 by Warren Davidson · Last progress March 5, 2025
Allows many non-corporate taxpayers who hold eligible assets for more than three years to adjust their tax basis upward for inflation when calculating gains or losses. The inflation adjustment is tied to the GDP implicit price deflator and applies to certain C‑corporation common stock, specified digital assets on cryptographically secured ledgers, and tangible property; depreciation, depletion, and amortization rules are not changed. The change applies to assets acquired after December 31, 2025, and includes multiple special rules for partnerships, S corporations, related-party transfers, and anti‑abuse provisions, with Treasury required to issue implementing regulations.