Sponsors (2)
The bill shields long-term noncorporate owners from taxation on inflation-driven gains—lowering tax bills for many individuals and small businesses—but does so at the cost of greater complexity, uneven treatment (excluding corporations), potential enforcement disputes, and reduced federal revenue.
Individual and partnership long-term holders of eligible assets (including certain tangible property, long-held stock, and specified digital assets) will have their capital-gain basis indexed for inflation using the GDP deflator for holdings over three years, reducing reported capital gains and lowering tax bills on inflation-driven appreciation.
Taxpayers and financial institutions benefit from a requirement that Treasury issue regulations and documentation to implement the indexing rules, which should clarify administration and reduce uncertainty about applying the new basis adjustments.
The exclusion of corporations from inflation indexing creates disparate tax treatment that may encourage entity restructuring or individual-level tax planning to capture the benefit, distorting business decisions and tax outcomes.
The indexing provision will reduce reported taxable capital gains and therefore likely reduce federal capital-gains tax revenue, increasing pressure on the deficit or requiring offsetting revenue increases or spending cuts.
The new election, recordkeeping, reporting, and related rules add compliance costs and complexity for taxpayers, partnerships, RICs/REITs, and brokers, increasing administrative burdens and tax-preparation expenses.
Based on analysis of 2 sections of legislative text.
Introduced February 27, 2025 by Rafael Edward Cruz · Last progress February 27, 2025
Creates an inflation-indexed basis rule for certain long-held noncorporate assets so taxpayers compute capital gain or loss using an adjusted basis increased for inflation measured by the GDP implicit price deflator. The rule applies only to dispositions of qualifying assets held more than three years (including C‑corp common stock subject to limits, specified digital assets on cryptographically secured ledgers, and tangible property), leaves depreciation and amortization calculations unchanged, and includes detailed anti‑abuse, related‑party, and entity‑level rules. Applies to indexed assets acquired after Dec. 31, 2025, with regulations to be issued by the Treasury Secretary.