Trump has proposed lowering capital gains taxes, but Congress would have to pass the change into law

During his 2024 campaign, Donald Trump proposed reducing the top federal capital gains tax rate from 20 percent to 15 percent. He also suggested indexing capital gains for inflation, which would reduce the taxable gain on assets held over time. However, a president cannot change tax rates alone — Congress must pass legislation to alter the tax code. Whether these proposals become law depends on which party controls Congress and how much support they have.

As of now, no capital gains tax reduction has been enacted. The current federal rates remain 0 percent, 15 percent, or 20 percent depending on your income level and how long you held the asset. This guide explains what Trump proposed, how the tax system currently works, and what would need to happen for rates to change.

Key Takeaways

  • Trump proposed lowering the top capital gains rate to 15 percent, but this would require Congress to pass new tax legislation.
  • Capital gains tax rates today are 0, 15, or 20 percent depending on your income bracket and whether you held the asset more than one year.
  • State capital gains taxes exist in some states and would not change if federal rates change.
  • Any tax law change takes months to negotiate and pass, and the outcome depends on which party controls the House and Senate.

How capital gains taxes work right now

When you sell an asset for more than you paid for it, the profit is called a capital gain. The federal government taxes this gain at different rates depending on how long you held the asset and how much total income you earned that year.

If you held the asset for one year or less, it is taxed as short-term capital gains at your ordinary income tax rate — the same rate as wages or salary. If you held it longer than one year, it is taxed as long-term capital gains at a preferential rate: 0 percent, 15 percent, or 20 percent, depending on your income bracket. For 2024, the 20 percent rate applies to single filers with income over $492,300 and married filers over $553,850. The 15 percent rate applies to most middle-income earners. The 0 percent rate applies to lower-income filers.

These rates are set by federal law and have been in place since 2013. They expire at the end of 2025 unless Congress votes to extend them.

What Trump proposed during his campaign

Trump's main proposal was to reduce the top long-term capital gains rate from 20 percent to 15 percent. This would lower taxes on investment profits for high-income earners. He also proposed indexing for inflation, which means adjusting your purchase price upward based on inflation before calculating the gain. For example, if you bought stock for $10,000 in 2010 and sold it for $20,000 in 2024, indexing would increase your cost basis to account for inflation, reducing the taxable gain.

Trump did not propose changes to the 0 percent or 15 percent rates, and he did not propose changes to short-term capital gains rates. He also did not propose changes to state capital gains taxes, which exist in a handful of states including California, New York, and Washington.

How a tax change would actually happen

For any capital gains tax change to become law, Congress must pass a bill and the president must sign it. This process typically takes several months and involves negotiation between the House, Senate, and the White House. If the same party controls all three, the process is usually faster. If power is divided, changes are harder to pass.

Tax bills often include many provisions beyond capital gains — changes to income tax brackets, deductions, credits, and business taxes. A capital gains change might be part of a larger tax package, or it might be included in a budget reconciliation bill, which requires only a simple majority in the Senate rather than 60 votes.

Even if a bill passes, it takes time to implement. The IRS must issue guidance on how to calculate gains under the new rules, and tax software companies must update their programs. Most changes take effect on January 1 of the year after the law is signed.

State capital gains taxes and how they differ

Seven states have their own capital gains taxes: California, Connecticut, Illinois, Maryland, Minnesota, New Jersey, and Washington. These taxes are separate from federal tax and would not change if the federal rate changes. For example, California taxes long-term capital gains at 13.3 percent on top of any federal tax owed.

If you live in one of these states and sell an asset at a gain, you owe both the federal capital gains tax and your state's tax. A reduction in federal rates would not reduce what you owe to your state.

What happens to current tax rates if Congress does not act

The current capital gains rates — 0 percent, 15 percent, and 20 percent — were set by the Tax Cuts and Jobs Act of 2017 and are scheduled to expire on December 31, 2025. If Congress does not pass a new law before that date, the rates will revert to their pre-2017 levels: 0 percent, 15 percent, and 20 percent for long-term gains, but with different income thresholds. The exact thresholds would be adjusted for inflation.

This expiration is sometimes called a "sunset." It means that without action, tax rates change automatically. Congress often extends expiring provisions, but it is not may provide. The outcome depends on which party controls Congress and what other priorities lawmakers have.

How to stay informed about tax law changes

Tax law changes are announced through bills introduced in Congress, which you can track on Congress.gov. Major news outlets also report on tax proposals and their status. The IRS website (irs.gov) publishes official guidance once a law is signed.

If you are planning to sell an asset or make investment decisions, it is worth checking the current status of any proposed tax changes. A tax professional or financial advisor can also help you understand how current rates apply to your situation and what changes might affect you.

Frequently Asked Questions

If Trump's proposal passes, when would the new rate take effect?

Tax law changes typically take effect on January 1 of the year after the bill is signed. If a bill were signed in 2025, the new rate would likely apply to gains from sales made on or after January 1, 2026. The IRS would issue guidance with the exact effective date once the law is final.

Would a capital gains tax cut help me if I have a regular job?

Only if you sell investments at a profit. Capital gains tax applies only to investment income — stocks, real estate, bonds, and similar assets. Wages and salary are taxed as ordinary income at different rates. If you do not own investments or do not sell them, capital gains tax changes do not affect you.

Does indexing for inflation mean I pay less tax?

Yes, in most cases. Indexing increases your cost basis (the price you paid) to account for inflation, which reduces the taxable gain. For example, if inflation was 30 percent since you bought an asset, your cost basis would be adjusted upward by 30 percent, making your gain smaller and your tax bill lower.

What if I sell an investment before the end of 2025?

You pay tax at the current rates that are in effect when you sell. If you sell in 2024 or 2025, you owe tax under the current law. Any new rates would apply to sales made after the new law takes effect, which would be January 1, 2026 at the earliest.

Can states lower their capital gains taxes if the federal rate changes?

States set their own capital gains tax rates independently. A change to the federal rate does not automatically change state rates. States could choose to lower their rates, but that would require their own state legislation. Currently, only seven states have capital gains taxes, and they vary widely in rate and structure.