Sponsors (2)
The bill lowers taxable long‑term capital gains for many noncorporate, long‑term asset holders by indexing basis for inflation, but it introduces recordkeeping requirements, added complexity and compliance costs, and leaves some taxpayers and basis components without full protection.
Noncorporate owners (individuals, partnerships, S corporations, trusts) of long‑held assets — including qualifying digital assets and tangible property held >3 years — can index basis for inflation using the GDP implicit price deflator, reducing reported long‑term capital gains and potentially lowering tax bills.
Partnerships, S corporations, RICs/REITs, and common trust funds can pass indexing adjustments through to owners, aligning inflation treatment across many pass‑through entities and preventing double taxation mismatches.
The bill prescribes a standard GDP implicit price deflator as the inflation measure, providing an objective, administrable rule to calculate indexation and reducing ambiguity about how to measure inflation adjustments.
Taxpayers — especially individuals and middle‑class families — must retain written proof of original purchase price to claim indexing, creating new recordkeeping burdens and risking denial of the benefit if documentation is missing.
The indexing regime adds substantial complexity for taxpayers and the IRS (quarterly computations, GDP‑deflator revisions, pass‑through and anti‑abuse rules), increasing compliance costs, administrative burden, and the likelihood of errors or disputes.
Excluding corporations and relying on anti‑avoidance, related‑party, and distribution rules produces unequal treatment across entity types and may shift tax‑planning complexity and enforcement challenges onto certain taxpayers.
Based on analysis of 2 sections of legislative text.
Allows inflation indexing of basis for certain long‑held assets to reduce taxable capital gains for noncorporate holders.
Allows noncorporate taxpayers who hold certain assets more than three years to adjust (index) the asset’s tax basis for inflation when computing capital gain or loss, generally reducing taxable gains. It applies to long‑held common stock, specified digital assets recorded on cryptographically secured ledgers, and tangible property, with exclusions for depreciation, special passthrough/entity rules, anti‑abuse provisions, and a Treasury regulatory grant. The rule applies to indexed assets acquired after December 31, 2025, for taxable years ending after that date.
Official title: Amend the Internal Revenue Code of 1986 to provide for the indexing of certain assets for purposes of determining gain or loss.
Introduced February 27, 2025 by Rafael Edward Cruz · Last progress February 27, 2025