Sponsors (2)
The bill gives noncorporate investors meaningful relief by indexing long‑term capital gains for inflation, especially for pass‑through owners and holders of digital/tangible assets, at the cost of added complexity, recordkeeping requirements, uneven treatment across entity types, and rules that limit or exclude inflation protection for certain losses and depreciable basis.
Noncorporate owners (individuals, partnerships, S corporations, trusts) can index the basis of qualifying long‑term assets (including many digital assets and tangible property held over 3 years), reducing reported real capital gains and potentially lowering tax bills for investors and savers.
Pass‑through entities (partnerships, S corporations, RICs/REITs, common trust funds) can pass indexing adjustments through to their owners, allowing owners of pass‑through interests to receive the same inflation adjustment benefits rather than losing them at the entity level.
The bill uses a standard GDP implicit price deflator as the index for inflation adjustments, providing an objective, administrable benchmark for computing indexed basis.
Most taxpayers and the IRS will face greater complexity and administrative burden (quarterly computations, deflator revisions, passthrough and anti‑abuse rules), increasing compliance costs and IRS administration workload.
Noncorporate taxpayers must retain written proof of original purchase price to claim indexing, creating recordkeeping burdens and risking denial of the benefit for taxpayers who lack documentation.
Excluding corporations and imposing anti‑avoidance, related‑party, and distribution rules creates unequal treatment across entity types and shifts tax‑planning complexity (benefits limited for corporate owners and potentially creating new avoidance strategies to navigate), which can advantage some taxpayers over others.
Based on analysis of 2 sections of legislative text.
Allows inflation indexing of cost basis for certain long-held noncorporate assets (C-corp common stock, specified digital assets, tangible property) to reduce taxable capital gains.
Introduced February 27, 2025 by Rafael Edward Cruz · Last progress February 27, 2025
Permits an inflation adjustment (indexing) of cost basis when computing capital gain or loss for certain long-held assets owned by noncorporate taxpayers. Applies to qualifying assets—certain C corporation common stock (with limited foreign exceptions), specified "digital assets" recorded on cryptographically secured distributed ledgers that only confer economic or access rights, and tangible property—if held more than three years and supported by written proof of original purchase price. Indexing uses the GDP implicit price deflator, excludes prior depreciation/depletion/amortization, contains anti-abuse rules and related-party limits, and includes special passthrough and entity-level rules; it applies to assets acquired after Dec. 31, 2025, for taxable years ending after that date.