Currently, the highest capital gains tax rate is 20%, which many argue favors the wealthy, who own most of the capital assets like stocks and real estate.
Many Democrats propose increasing this rate to 39.6% for individuals earning over $1 million annually, aligning it with the top marginal income tax rate that existed before the TCJA.
The current step-up in basis rule allows heirs to reset the value of inherited assets to the market value at the time of the original owner's death, significantly reducing potential capital gains taxes.
Eliminating the step-up in basis at death would have significant implications for estate planning and investments. However, this proposal faces strong opposition from various interest groups.
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