The Equal Tax Act (S. 4122) fundamentally changes how the federal government taxes wealth transfers by eliminating the "step-up in basis" for inherited property and gifts, requiring heirs and recipients to pay capital gains taxes on appreciation that occurred before they received the assets—a change effective January 1, 2027. The bill creates exceptions for spousal transfers, charitable donations, and small annual gifts, while exempting most personal property unless it qualifies as business, investment, or collectible property. Beginning in 2027, new IRS reporting requirements will mandate that individuals and estate executors provide detailed information about all covered gifts and bequests, including recipient information, property descriptions, and fair market values. Additionally, the legislation caps the qualified business income deduction at $1 million per taxpayer annually starting in 2027, limiting a popular tax break for business owners. Overall, the bill targets high-net-worth individuals and their heirs while affecting business owners, estate planners, and anyone making substantial gifts or inheritances.
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