Qualified Small Business Stock (QSBS) may allow you to exclude gains on all or a large portion of your Federal capital gain tax when you sell your stock.
May 7, 2021
QSBS is a tax rule that was created to encourage founders, startup employees, and VCs to purchase stock in startups (and other small businesses) by allowing the opportunity to avoid tax on some or all of their gain from the sale of stock that qualifies for QSBS.
You may be eligible to eliminate tax on all or a large portion of your Federal capital gain when you sell - zero Federal tax. Many taxpayers are unaware of the benefits of QSBS and may be missing out on potential savings.
Gains from selling Qualified Small Business Stock (QSBS) may be eligible for up to 100% exclusion from federal income tax – which means, when you sell your qualifying stocks, you could avoid paying federal tax on gains of up to $10 million or 10x your tax basis (basis for this purpose is equal to the amount of cash plus the fair market value of any property contributed to the corporation in exchange for the stock). For example, if you invested $3 million in a QSBS in 2019, you could sell that stock five or more years later for up to $33 million and pay zero federal income tax on that gain. Companies and individuals must follow certain requirements in order to qualify.
The specific requirements to determine whether or not a stock is QSBS are explained in detail below.
If you answer "NO" to any of these questions you do not qualify.
YearEnd tax professionals focus on the unique circumstances of founders, startup employees, VCs and their companies. We are well-versed in the intricacies of QSBS, the associated filings and documentation, and steps that may be needed to meet the requirements. Let us know if we can help.