Insurance Debt No Longer Taxed as Capital Asset After 2025, Extending Loss Carryovers to 10 Years

This bill, the Secure Family Futures Act of 2025, makes two major technical changes to the tax code specifically for certain insurance companies. The headline here is that debt instruments—think bonds or notes—purchased by what the bill calls an “applicable insurance company” after December 31, 2025, will no longer be treated as capital assets for tax purposes (SEC. 2). Essentially, this changes how these companies calculate gains and losses on a massive chunk of their portfolio.

The Debt Dilemma: Why 'Capital Asset' Matters

For most people, selling stocks or investment property means dealing with capital gains tax. The same rules apply to companies. When a debt instrument is treated as a capital asset, its sale is subject to specific tax rates and rules. By carving out debt from the capital asset definition for insurers, the bill simplifies their tax accounting and potentially changes the tax rate applied to those transactions. This shift applies to nearly all insurance companies—the “applicable” definition is broad, excluding only a few specialized types (SEC. 2).

What does this mean in real life? Insurance companies are massive investors, and debt instruments are their bread and butter. If an insurer sells a bond they bought in 2026, the gains or losses won't be treated under the capital gains structure, which can offer flexibility and better tax outcomes for the company. This is a clear tax benefit designed to make life easier and potentially more profitable for the insurance industry, though it also means the U.S. Treasury might collect less tax revenue from these specific investment sales.

A Decade to Recover Losses

The second major change deals with how insurance companies manage capital losses. Right now, there are limits on how long a company can carry forward a capital loss to offset future profits. This bill extends that carryover period to a full 10 years for applicable insurance companies, specifically for net capital losses incurred in tax years beginning after December 31, 2025 (SEC. 3).

Imagine an insurer takes a huge financial hit—say, a massive loss from a foreign government seizing assets (foreign expropriation). Under current rules, they might have a shorter window to use that loss to reduce their taxable income. Giving them 10 years to carry over that loss provides a much longer runway to recover. This provision acts as a financial stability measure, helping insurers smooth out the impact of major, unexpected losses over a full decade. While this is a clear benefit to the insurance industry’s bottom line, it’s worth noting that every dollar of loss carried forward is a dollar the company isn't paying taxes on in that year. For taxpayers, this is a sector-specific tax break that could lead to reduced government revenue.

Who Feels the Change?

Ultimately, this bill is a technical adjustment aimed squarely at the financial operations of the insurance industry. The immediate impact on the average person—the policyholder, the office worker, the small business owner—is indirect. However, when a large, regulated industry receives favorable tax treatment like this, the idea is often that the increased stability and profitability will trickle down, perhaps leading to more competitive premiums or greater investment. Conversely, any reduction in corporate tax revenue ultimately needs to be balanced elsewhere, potentially affecting government services or other tax rates. The key takeaway is that after 2025, the insurance industry gets a significant tax advantage on its investment debt and a much longer window to manage its major capital losses.