Friedman Bill Would Tax Large Asset-Backed Loans at 23.8%, Exempting Mortgages up to $3 Million
Rep. Laura Friedman (D-CA) has introduced the Pay Your Taxes Avoided by Borrowing (TAB) Act, which would impose a 23.8% excise tax, paid by the borrower, on covered loans issued after December 31, 2026. Friedman says the bill targets the “buy, borrow, die” strategy, in which wealthy individuals borrow against appreciating assets instead of selling them. The rate equals the top long-term capital gains rate plus the Net Investment Income Tax.
The tax would apply only to the portion of a borrower’s total covered loans above $1 million, with related parties counted together. A borrower who later sells the asset securing the loan would receive an offsetting long-term capital loss equal to the taxed loan amount. Lenders would have to report covered loans above the threshold to the IRS and to borrowers, and Treasury would issue anti-avoidance rules.
- Mortgages on a primary residence up to $3 million are exempt.
- Qualified student loans are exempt.
- Business loans are exempt, other than loans used to fund distributions.
- Qualified margin loans used for trading securities are exempt.
Why it matters
The bill is a proposal and has not become law. As written, it would exempt primary-residence mortgages up to $3 million, while loans secured by other assets, including real estate, could be covered above the $1 million threshold.
Source: Rep. Laura Friedman (D-CA), October 20, 2026. Read the original release
