Is Unrealized Capital Gains Tax Coming to The US?

No. As of February 2026, the United States does not have a federal unrealized capital gains tax. Current law only taxes you when you actually sell an asset and pocket the profit. Your unsold Bitcoin, stocks, and real estate stay tax-free until you cash out. But that doesn't mean this idea is dead. It keeps coming up in policy debates, and a few states are now pushing their own versions targeting billionaires. Even if you're nowhere near that tax bracket, what happens next is worth paying attention to.

What Exactly Is an Unrealized Capital Gains Tax?

Under the current system, capital gains taxes kick in only after you sell. You bought ETH at $1,000, it's now worth $3,500, but you haven't sold. You owe nothing. Rates for long-term holdings (over a year) sit at 0%, 15%, or 20% depending on your income. For 2026, a married couple with taxable income up to $98,900 pays zero on those gains.

An unrealized capital gains tax would flip that. It would treat the yearly increase in your asset's value as taxable income, whether you sold or not. Think of it like getting a property tax bill on your crypto portfolio every year.

Why Does This Keep Coming Up?

Proponents argue it closes a loophole for billionaires who build massive wealth through appreciating assets without ever selling. During the 2024 presidential campaign, then-Vice President Kamala Harris proposed a 25% minimum tax on total income, including unrealized gains, for households worth over $100 million. The Biden-Harris 2025 budget framed it as a "prepayment" on future taxes to make the top 0.01% pay at least 25% effectively.

Unrealized gains make up nearly half of estate values for the ultra-wealthy, and much of that escapes taxation entirely through inheritance rules. But critics call it wealth confiscation. They argue it could force sales during market downturns, crush innovation, and drive capital offshore. Valuing illiquid assets like private companies or startup equity on a yearly basis would also be a bureaucratic disaster.

Where Does It Stand Federally?

Dead in the water. President Trump's One Big Beautiful Bill Act, signed into law on July 4, 2025, kept the existing realized-only capital gains structure intact. The law actually moved in the opposite direction, expanding tax breaks for investors.

There are also constitutional hurdles. The Supreme Court has historically required "realization" for income taxes, and the 2024 Moore v. United States ruling further narrowed the scope for taxing unrealized gains. Senator Mike Lee has publicly stated Congress is "prohibited" from imposing such a tax federally. The legal and political barriers are steep.

What About State-Level Efforts?

This is where it gets interesting. While federal action is off the table, two major states are testing the waters.

California is working to put a proposed one-time 5% wealth tax on billionaires to a ballot vote in November 2026. Signature gathering is underway, and if the measure qualifies and voters approve it, the tax would apply retroactively to anyone who was a California resident on January 1, 2026, with a net worth exceeding $1 billion. Payments would start in 2027. Real estate, pensions, and retirement accounts would be excluded. It's technically a wealth tax on net worth rather than a pure unrealized gains tax, but because it captures appreciation in assets like stocks and crypto, the effect is similar. The proposal has already triggered an exodus of tech leaders to low-tax states like Florida and Texas.

Illinois lawmakers are actively pushing renewed proposals. An earlier attempt, the Extremely High Wealth Mark-to-Market Tax Act, targeting ~4.95% on unrealized gains for billionaires, was shelved after backlash and state constitutional concerns. A new bill (SB 3376) was filed in February 2026, applying income tax to unrealized appreciation on net worth over $1 billion. It's active in legislative discussion but far from passed, and faces huge legal hurdles.

Neither would directly tax anyone outside those states, and both only target the ultra-wealthy. But the political energy behind them is real.

Why Should Everyday Investors Care?

You're probably not worth $100 million. But here's why this still matters.

If California's tax passes, billionaires forced to liquidate positions to cover the bill could create real market volatility. When large holders sell in a hurry, stock prices dip, and that hits your retirement account and your crypto portfolio, whether you're in California or not.

Then there's the slippery slope concern. Tax thresholds have a track record of creeping downward over time. Dropping them from billionaires to millionaires would be politically toxic right now, and the mobility of wealth makes it hard to enforce. But the precedent matters. If these taxes survive legal challenges and produce revenue, the pressure to expand them grows.

And the international angle adds context. The Netherlands voted on February 12, 2026, to impose a 36% tax on unrealized gains from stocks, bonds, and crypto, effective 2028, pending Senate approval. It's already sparking capital flight fears and investor relocation chatter across Europe. That's a live experiment worth watching.

The Bottom Line

No unrealized capital gains tax is coming to the US at the federal level. The legal, political, and constitutional barriers are too high. But California and Illinois are the ones to watch at the state level, and the Netherlands is running a real-world test overseas. Whether you hold crypto, stocks, or real estate, what starts as a billionaire problem has a way of becoming everyone's problem.

Sources:

• Bankrate – Overview of current US capital gains tax rules and realization requirements
• Kiplinger – 2026 capital gains tax rate brackets and income thresholds
• Tax Foundation – Analysis of the California 2026 Billionaire Tax Act ballot initiative
• IRS – Official breakdown of One Big Beautiful Bill Act tax provisions
• SmartAsset – Confirmation that OBBBA preserves existing capital gains rate structure
• Tax Foundation – Comprehensive analysis of OBBBA major tax provisions
• IMI Daily – Reporting on Dutch House vote approving 36% unrealized gains tax
• Ballotpedia – California wealth tax ballot initiative details and timeline
• CBPP – Biden-Harris 2025 budget proposal framing unrealized gains tax as prepayment
• NBC News – Reporting on California billionaire exodus and political debate
• CBS News – California ballot initiative mechanics and signature requirements
• California LAO – Legislative Analyst's Office fiscal analysis of the proposed wealth tax