Qualified Small Business Stock (QSBS)
Written by Aparna Devalla, CPA
Curated by Rubric Financial
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What QSBS Is and Why It Matters
- Section 1202 of the Internal Revenue Code allows shareholders of qualified small businesses to exclude millions of dollars of capital gains from federal tax
- The exclusion applies to stock in C-corporations acquired at original issuance, and the rules now depend on when the stock was acquired: the OBBBA (July 2025) created two regimes
- For stock acquired on or before July 4, 2025: the exclusion is up to $10M (or 10x cost basis, whichever is greater) with a 5-year holding period and a $50M gross-assets ceiling
- For stock acquired after July 4, 2025: a tiered exclusion applies (50% at 3 years, 75% at 4 years, 100% at 5 years), with a $15M per-issuer cap (indexed for inflation from 2027) and a $75M gross-assets ceiling
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