# Capital Gains Inflation Relief Act of 2021

This bill would let people pay less in taxes when they sell certain investments that have gone up in value over time. The key idea is that if you buy something for $100 and sell it years later for $150, you normally owe taxes on that $50 gain. But this bill would reduce that taxable gain by adjusting for inflation that happened during the time you owned it.

Here's how it would work in practice: Say you bought stock in 2000 for $10,000 and sold it in 2025 for $20,000. Normally you'd owe taxes on the $10,000 profit. But under this bill, the government would calculate how much inflation occurred between 2000 and 2025 using official economic data. If inflation was 50% over that period, your cost basis would be adjusted upward to $15,000, meaning you'd only owe taxes on a $5,000 gain instead of $10,000. The longer you hold an investment, the bigger this inflation adjustment could be, so this benefit grows over time.

The bill applies to regular stocks, real estate, cryptocurrency, and other investments held for more than three years by individuals (not corporations). However, there are important limits. You'd need written documentation of what you originally paid for the asset. The benefit wouldn't apply if you sold something to a family member or related business. Additionally, if you use strategies to artificially reduce your investment risk—like buying insurance against losses—the inflation adjustment wouldn't apply during that period.

The practical effect is that this would reduce capital gains taxes, particularly for long-term investors and wealthy individuals who hold significant assets. Critics argue it primarily benefits the wealthy since they own most investment assets, while supporters say it prevents people from paying taxes on gains that are just keeping up with inflation rather than representing real economic growth.

Capital Gains Inflation Relief Act of 2021

Capital Gains Inflation Relief Act of 2021 This bill allows the adjusted basis of certain assets (including any common stock in a C corporation, any digital asset, and tangible property used in a trade or business) to be indexed for inflation for the purpose of determining the gain or loss of a taxpayer (other than a corporation) who has held the asset for more than three years. The bill sets forth rules for applying the inflation adjustment to <ul> <li>short sales; </li> <li>regulated investment companies; </li> <li>real estate investment trusts;</li> <li>other pass-through entities, including partnerships, S corporations, and common trust funds;</li> <li>dispositions between related persons; and </li> <li>improvements to property or contributions of capital.</li> </ul> The Internal Revenue Service may disallow an adjustment if any person transfers cash, debt, or any other property to another person for the principal purpose of securing or increasing the adjustment allowed by this bill.