What does QSBS qualification do?

Under §1202, federal capital gains tax on qualifying small-business-stock gains can be excluded — up to $10M or 10x the original basis, whichever is greater. OBBBA 2025 introduces a tiered exclusion: 50% at 5+ years, 75% at 6+, 100% at 7+.

Does California honor QSBS?

No. California does not conform to §1202 — state tax of up to 13.3% still applies on the gain even when federal is excluded. Other non-conforming states include New Jersey, Alabama, and Pennsylvania.

What if I have to sell before 5 years?

Section 1045 lets you roll the proceeds into a new QSBS within 60 days, deferring the gain and preserving the qualification holding period (the new stock inherits the original's holding period).

Free Qualification Check

QSBS Qualifier

Six questions. Determine whether your small-business stock qualifies for Section 1202 exclusion — up to $10M of gain tax-free at the federal level.

Answer each question based on your specific stock. Disqualifying answers heavily weight the verdict.

1. Was the stock issued by a domestic C-corporation?
2. Was the stock issued after August 10, 1993?
3. Did you acquire the stock at original issuance (or by gift / inheritance from the original holder)?
Secondary purchases (buying stock on the open market or from another shareholder) typically don't qualify.
4. Were the corporation's gross assets at issuance under $50M?
5. Is the corporation engaged in a qualified trade or business?
Excluded: banking, insurance, farming, mining, professional services (law, health, accounting, consulting), restaurants, hotels.
6. How long have you held (or plan to hold) the stock before sale?

Answer all questions to see your result.