Bill · H.R. 1857· House(119-HR-1857)
Capital Gains Inflation Relief Act of 2025
- Introduced
- 3/5/2025
- Last activity
- 3/5/2025 — Referred to the House Committee on Ways and Means.
- Sponsored by
- Warren Davidson
- Cosponsors
- None
- Introduced
- In Committee
What this bill would do
The Capital Gains Inflation Relief Act of 2025 proposes to amend the Internal Revenue Code regarding how gains or losses are calculated on certain assets. It introduces the concept of an "indexed basis" to replace the adjusted basis for specific assets held for more than three years. This indexing uses the gross domestic product deflator to adjust the basis for inflation. The "indexed assets" include certain common stock, digital assets, and tangible property. These adjustments would pass through entities like partnerships and S corporations to their members. The new rules would apply to assets acquired after December 31, 2025.
Yes
Would high-income households be better off under this?+5
The bill benefits those with significant capital assets like common stock and digital assets by providing inflation-adjusted basis.
Does this cut the tax on profits from selling investments?+5
The bill allows taxpayers to increase their asset basis using the GDP deflator, which reduces the taxable capital gain when the asset is sold.
Would business owners be better off under this?+4
The bill provides tax relief for assets used in trade or business, such as certain tangible property and stock.
The opposite
Is this likely to slow the rise in prices?-1
By providing inflation relief for capital gains, the bill may slightly reduce the immediate fiscal pressure to curb inflation through tax policy.
Who it would affect, and how
Potential Positive Impacts for People
-
Inflation Adjustment for Asset Basis: For taxpayers (other than corporations) who hold certain assets for more than three years, the basis of the asset is increased by an applicable inflation adjustment. This adjustment is based on the gross domestic product deflator (Section 2(a)(1)).
-
Broad Asset Inclusion: The benefits of indexing apply to a variety of assets, including common stock in non-foreign C corporations, certain foreign corporations traded on established markets, digital assets, and specific tangible property (Section 2(b)(1)).
-
Benefit for Short Sellers: In specific short sale scenarios lasting more than three years, the amount realized can be increased by the applicable inflation adjustment (Section 2(d)(2)(A)).
-
Pass-Through Benefits: The benefits of the inflation adjustment at the entity level can be passed through to partners in a partnership, shareholders in an S corporation, and participants in a common trust fund (Section 2(f)).
-
Investment Entity Adjustments: Qualified investment entities, such as regulated investment companies and real estate investment trusts, are allowed to apply these adjustments at the entity level (Section 2(e)(1)(A)).
Potential Negative Impacts for People
-
Documentation Requirements: The inflation adjustment only applies to indexed assets if the taxpayer has written documentation of the original purchase price (Section 2(a)(1)(3)).
-
Exclusion of Certain Deductions: The indexing of the basis does not apply to deductions for depreciation, depletion, or amortization (Section 2(a)(1)(2)).
-
Risk Reduction Penalty: If a taxpayer enters into a transaction that substantially reduces the risk of loss for an asset, that asset is no longer treated as an indexed asset for that period (Section 2(d)(1)).
-
Restrictions on Transfers to Increase Adjustment: The Secretary has the authority to disallow part or all of the adjustment if a person transfers property primarily to secure or increase the inflation adjustment (Section 2(h)).
-
Limitations on Loss Calculations: The indexing adjustment cannot be used to increase or create a net ordinary loss (Section 2(i)(4)).
-
Exclusions for Certain Foreign Stocks: The definition of an indexed asset excludes certain types of foreign stock, such as those in foreign investment companies, passive foreign investment companies, or foreign personal holding companies (Section 2(b)(2)(B)).
Groups and Interests Ranking
Every group the model scored this bill for, from -10 to +10. Hover a score for the reason it gave.
- Demographic And Interest Groups
- Good For High Income Households+5Good For Business Owners+4
- Economy And Finance
- Reduces Capital Gains Tax+5Reduces Inflation-1
- 3/5/2025
- Referred to the House Committee on Ways and Means.
- Introduced in House
One bill Congress.gov lists as related to this one — companions in the other chamber, earlier versions, and bills this one absorbed or was folded into.