Explainer

The Carried Interest Tax Break Won’t Die. How Private Equity’s Favorite Loophole Works

Mike Johnson speaks as Lisa McClain, from left, John Rutherford, Tom Emmer and Steve Scalise listen during a news conference at the US Capitol in Washington, DC, on May 14.Photographer: Alex Wong/Getty Images

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By Erin Schilling

May 14, 2025 at 4:21 PM UTC

Despite President Donald Trump’s monthslong advocacy for eliminating the carried interest tax break, one of the most controversial loopholes in the US tax code remains unchanged in the draft version of the “big, beautiful” tax package proposed by Republicans in Congress.

President Donald Trump told Republican lawmakers in February that he is prioritizing ending the loophole in the tax code, which allows private equity and venture capital managers to pay a more favorable tax rate on capital gains, a key part of their earnings. He reiterated his desire to end the tax preference in a May 7 call with House Speaker Mike Johnson.