Capital Gains Inflation Relief Act of 2025
If enacted, the legislation would have widespread implications for individual taxpayers and investors. Under this new structure, assets considered 'indexed assets'—which include common stocks, tangible property, and digital assets—will have their bases adjusted by the inflation rate, as captured by the gross domestic product deflator. This means that taxpayers would pay taxes only on the real gains after accounting for inflation, potentially increasing disposable income for many by lowering effective tax rates on capital gains. This approach could also encourage longer investment horizons by making it less costly to hold onto assets in times of inflation.
SB798, known as the Capital Gains Inflation Relief Act of 2025, proposes significant changes to how capital gains are calculated for tax purposes. Specifically, the bill seeks to index the basis of certain assets to inflation to determine the gain or loss when they are sold. This aims to alleviate the tax burden on taxpayers by allowing them to account for inflation when realizing gains on their investments. The indexed basis would replace the traditional adjusted basis for assets held for over three years, introducing a more equitable treatment of long-term investments in the face of rising prices.
Despite its intended benefits, SB798 may attract criticism from some quarters. Detractors argue that the bill could disproportionately favor wealthier individuals who benefit more from capital gains tax relief, deepening economic inequalities. Moreover, there are concerns regarding the complexity of implementation and whether the IRS will have the capability to manage these new indexing rules effectively. The potential for altering asset valuation may also introduce uncertainty in the market, as investors adjust to new tax implications and the resulting changes in capital flows.