The Equal Tax Act reforms how capital gains and inherited assets are taxed by equalizing treatment with wage income for high earners. The bill limits preferential capital gains tax rates to individuals earning $1 million or less and eliminates the "stepped-up basis" loophole by treating inherited property as taxable sales at fair market value, though heirs can exclude up to $1 million in inherited gains (with an additional 50% exclusion for qualifying family farms and businesses). To ease the transition, the legislation allows heirs to spread capital gains taxes on inherited assets over five years at a reduced interest rate of 45% of the normal rate, starting in 2026. The bill also caps real estate like-kind exchanges at $500,000 annually and restricts the qualified business income deduction to taxpayers earning $1 million or less in taxable income. New IRS reporting requirements take effect January 1, 2026, requiring executors and gift-givers to document inherited and gifted property details.
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