Summary
Makes tax rates on investment profits the same as on wages for those with income over $1 million and taxes gains on property when it is gifted or inherited.
What problem does this solve?
Wealthy people often pay lower tax rates on investment money than working people pay on their salaries. This bill makes high earners pay the same tax rate on investments as on work income and taxes asset growth at death or when gifted.
Who does this affect?
- High-income individuals (over $1 million)
- Investors and real estate owners
- Heirs of significant estates
What does this bill do?
Reference
Text:
Section:
Sec. 2(a)
Header:
Preferential rates for dividends and capital gains limited to incomes of $1,000,000 or less
Taxes capital gains as regular income for high earners
Removes lower tax rates on investment profits, like capital gains and dividends, for people with taxable income over $1,000,000.
Reference
Text:
Section:
Sec. 3(a)
Header:
Deemed realization of capital gains at time of gift or death
Taxes property gains when gifted or inherited
Treats property transferred as a gift or at death as if it were sold, making any increase in value taxable as a capital gain.
Reference
Text:
Section:
Sec. 7(a)
Header:
Limitation on use of like-kind exchanges to avoid tax on real estate gains
Limits tax deferral for real estate swaps
Caps the amount of taxable gain that can be delayed using a like-kind real estate exchange to $500,000 per year, with a $1,000,000 lifetime limit.
Exempts $1 million in gains at death
Allows the first $1,000,000 of capital gains from assets transferred at death to be excluded from income, protecting smaller estates from the new tax.
Provides exceptions for spouses and charities
Exempts transfers of property to a spouse or to a charity from the new tax on gains at the time of gift or death.
Reference
Text:
Section:
Sec. 4(a)
Header:
Exclusion of gain from transfers of appreciated assets at death
Offers relief for family farms and businesses
Excludes 50% of gains over $1,000,000 for qualifying family farms or businesses transferred at death, if they continue to be used as such for 10 years.
Allows installment payments for death-related taxes
Permits the tax owed on gains from property at death to be paid in equal installments over a period of up to five years.
Limits a small business tax deduction
Restricts the qualified business income deduction to taxpayers with taxable income of $1,000,000 or less.
What is the real world impact?
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Promotes tax fairness between workers and investors
Aims to make the tax system more fair by ensuring that the wealthiest individuals pay the same tax rates on their investment income as middle-class families pay on their wages.
When does this start?
The changes in this bill would apply to tax years, gifts, and deaths occurring after December 31, 2026.