On March 6, 2026, the President enacted the Labor Modernization Law, which, in its tax chapter, introduced two substantive changes to the Income Tax regime: an express mechanism allowing inflation indexation of Income Tax Carryforwards and a new exemption for gains derived from the sale of real estate by individuals. Both measures have different effective dates and operate through different mechanisms.
What follows is a comparative analysis of the prior framework, the changes introduced, and their practical implications.
1. CPI indexation of Income Tax Carryforwards
Until now, Income Tax Carryforwards were applied in future fiscal years at their historical value, without any adjustment or indexation. In a context of sustained inflation, this effectively resulted in a systematic erosion of their economic value. For example, an Income Tax carried forward of $100 generated in 2022 would represent only a fraction of its original real value when applied against taxable income in fiscal year 2024.
The reform closes that gap, although only prospectively. It establishes that Income Tax Carryforwards generated in fiscal years beginning on or after January 1, 2025, will be adjusted according to the variation of the general Consumer Price Index (CPI) published by INDEC, measured between the month of the closing of the fiscal year in which the amount originated and the month of the closing of the fiscal year in which it is utilized.
In addition, the provision expressly clarifies that the general adjustment mechanism set forth in Section 93 of the Income Tax Law does not apply, confirming that this is a specific and autonomous regime. While this clarification does not have concrete practical effects on the new indexation mechanism itself, it likely seeks to influence ongoing administrative and judicial claims in which taxpayers are seeking recognition of inflation indexation of Income Tax Carryforwards for fiscal years prior to this reform.
Practical scope
The reform aims to preserve the economic value of Income Tax Carryforwards when they are eventually utilized, preventing inflation from eroding their real value when offset against profits in subsequent years.
In practice, this requires organizing the inventory of Income Tax Carryforwards by year of origin. Under the new regime, not all of them have the same value: those generated before 2025 remain non-indexed and continue to lose real value over time, while those generated from 2025 onward will tend to preserve their real economic value in an inflationary environment. Treating them interchangeably may lead to management errors and potential tax contingencies.
2. Exemptions for real estate income
The Labor Modernization Law amended subsection (n) of Section 26 of the Income Tax Law, significantly expanding the scope of real estate income that is exempt from taxation. The change has two clearly differentiated dimensions: one concerning rental income from residential properties and another exempting gains derived from the sale of real estate. Both have different effective dates and their own operational mechanics, which should be analyzed separately.
Before the enactment of this law, subsection (n) of Section 26 exempted two specific items: the imputed rental value of an owner-occupied home and the gain derived from the sale of the taxpayer’s principal residence. The exemption was narrow, limited exclusively to the property used as the taxpayer’s primary residence, and did not apply to properties rented to third parties or to other real estate holdings.
What the reform introduces
(i) Rental income from residential properties
The reform maintains the exemption for the imputed rental value of the principal residence—without changes in that respect—and adds, with effect for fiscal years beginning on or after January 1, 2026, a new exemption: gains obtained by property owners from renting out real estate intended as the tenant’s residence.
The most relevant technical clarification is that these rents will no longer be eligible for the deduction equivalent to 10% of the total annual rent agreed upon as a special deduction. By structuring the benefit as a full exemption rather than a deduction, the legislator prevents a potential double benefit: a taxpayer whose rental income is exempt cannot also claim the deduction on the same income.
In practice, property owners who rent real estate for residential purposes will no longer be subject to Income Tax on that income as of January 1, 2026.
(ii) Gains from the sale of real estate
Under the previous regime, only the gain derived from the sale of the taxpayer’s principal residence was exempt. The reform goes significantly further: it extends the exemption to all gains derived from the sale of real estate—and from the transfer of rights over real estate—obtained by individuals and estates, provided that the transaction is completed on or after January 1, 2026.
Prior to the introduction of this new exemption, and since the 2018 tax reform, these transactions were subject to a 15% tax rate on the gross gain obtained from the sale of real estate acquired on or after January 1 of that year. In other words, the 15% tax currently applicable to gains from the sale of real estate purchased since 2018 will be eliminated for transactions completed as of 2026, regardless of the date on which the property was acquired.
The exemption does not operate autonomously. The law expressly refers to future regulations to define the applicable conditions, requirements, and exclusions. Until the implementing decree is issued, the practical scope of the benefit remains incomplete.
