QSBS Exclusion Calculator (Section 1202)

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Walk-through

How to Use This Calculator

4 steps

1

Enter your cost basis and sale proceeds

Type what you paid for the shares and what you expect to receive at exit. The difference is your gain — and your cost basis also sets the 10-times-basis cap the calculator uses.

2

Enter the acquisition and sale dates

These drive everything: stock acquired after July 4, 2025 uses the new OBBBA tiers, and the gap between the two dates is your holding period, which sets the exclusion percentage.

3

Add gross assets and your tax rate

Enter the company's gross assets at issuance (it must clear the $50M/$75M test) and pick your long-term capital gains rate. Leave gross assets at 0 if you do not know it.

4

Read the exclusion, then the other tabs

The hero shows the gain excluded and the tax saved. Open Holding-Period Tiers to see the value of waiting, and State Conformity to check whether your state taxes the excluded gain.

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Reference

Formula & Methodology

3 formulas

Excluded gain

excluded = min(gain, cap) x exclusion% (gain = proceeds - cost basis)

The exclusion percentage comes from the holding period and regime: pre-OBBBA it is 0% until a full 5-year hold, then 50/75/100% by acquisition vintage; post-OBBBA it is 50% at 3 years, 75% at 4, and 100% at 5.

Per-issuer cap

cap = greater of ($10M pre-OBBBA / $15M post-OBBBA) or 10 x cost basis

The exclusion is limited per issuer to the greater of the dollar cap or ten times your adjusted basis. Gain above the cap is ordinary long-term capital gain.

Tax saved

tax saved = gain x LTCG rate - (included 1202 gain x 28% + gain above cap x LTCG rate)

The non-excluded eligible gain is taxed at the 28% Section 1202 rate plus NIIT, not the 15/20% rate — so a partial (50/75%) exclusion saves less than the excluded amount times your ordinary rate.

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High YMYL

Trust, Methodology & Sources

Reviewed by Calculover Editorial Review · Updated 2026-07-16 · 3 sources

Editorial accountability

Author: Quinn Sumner - Editor

Owner: Quinn Sumner - Editorial owner

Reviewer: Calculover Editorial Review - High-risk source and limitation review

Last reviewed: 2026-07-16

Last verified: 2026-07-16

Data effective: 2025-07-04

Methodology

The calculator implements IRC Section 1202 under both regimes, branching on the July 4, 2025 acquisition-date cutoff introduced by the One Big Beautiful Bill Act. It applies the holding-period exclusion percentage (binary five-year pre-OBBBA; tiered 50/75/100% at 3/4/5 years post-OBBBA), the per-issuer cap (greater of the $10M/$15M dollar cap or ten times basis), and the gross-assets eligibility test ($50M/$75M). The non-excluded Section 1202 gain is taxed at the 28% rate plus NIIT; gain above the cap is ordinary long-term capital gain.

Assumption: Assumes original-issue domestic C-corporation stock, a qualified active trade or business, and that the holder is not a corporation — the calculator cannot verify these.

Assumption: Uses the cost basis, sale proceeds, and dates you enter; the acquisition date alone determines which regime and caps apply.

Assumption: The 28% Section 1202 rate applies to the non-excluded eligible gain; the 3.8% NIIT is added when you select the 23.8% rate.

Assumption: State conformity uses each non-conforming state's approximate top marginal rate as a rough estimate, not a computed state return.

Limitations & guidance

Does not model the alternative minimum tax 7% preference on the 50%/75% excluded bands, Section 1045 rollovers, gifts, trusts, or stacking across multiple holders.

It is an estimate, not a completed tax return; QSBS eligibility is fact-specific and easily lost.

Tax rules, dollar caps, inflation indexing, and state conformity can change after the last-verified date.

Professional guidance: This QSBS calculator is for education and planning only and is not tax, legal, or financial advice. Section 1202 eligibility is complex and easy to blow — confirm your facts and figures with a qualified CPA or tax attorney before acting.

Primary sources

26 U.S. Code § 1202 — Partial exclusion for gain from certain small business stock - Cornell Law School, Legal Information Institute

One Big Beautiful Bill Act Increases Tax Benefits for Qualified Small Business Stock - Holland & Knight

QSBS gets a makeover: What tax pros need to know about Sec. 1202's new look - The Tax Adviser (AICPA)

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Glossary

Key Terms Explained

8 terms

QSBS (qualified small business stock) Original-issue C-corporation stock in a company that met the gross-assets test and ran a qualified active trade or business, eligible for the Section 1202 gain exclusion.

Section 1202 The Internal Revenue Code section that lets non-corporate holders exclude a large share of the gain on qualified small business stock held long enough, subject to a per-issuer cap.

Gross-assets test To be QSBS, the company's aggregate gross assets must not have exceeded $50 million (pre-OBBBA) or $75 million (post-OBBBA) at any point through the stock's issuance.

Holding-period tiers For stock acquired after July 4, 2025, the exclusion is 50% at three years, 75% at four, and 100% at five. Earlier stock has a single binary five-year requirement.

Per-issuer cap The lifetime limit on excludable gain from one company: the greater of $10 million (pre-OBBBA) or $15 million (post-OBBBA), or ten times your adjusted basis in the stock.

C-corporation QSBS must be stock of a domestic C-corporation, both when issued and generally throughout the holding period. S-corporation and LLC/partnership interests do not qualify.

Qualified trade or business An active business other than the excluded fields — most services (health, law, consulting, finance), farming, hospitality, and businesses whose principal asset is reputation or skill.

State conformity Whether a state follows the federal Section 1202 exclusion. Most do; California, Pennsylvania, Alabama, and Mississippi tax the federally excluded gain anyway.

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Scenarios

Real-World Examples

3 worked examples

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Founder — pre-OBBBA, five-year hold

$50k basis, $5M sale, acquired 2022, held 5 years, no-tax state

Cost basis / sale $50,000 / $5,000,000 Held 5 years (100% exclusion)

Held five full years under the pre-OBBBA rules, all $4,950,000 of gain is 100% excluded — a federal tax bill near $0 and roughly $1,178,100 saved versus a normal 23.8% sale.

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Early employee — post-OBBBA, three-year hold

$100k basis, $4M sale, acquired 2026, held 3 years

Cost basis / sale $100,000 / $4,000,000 Held 3 years (new 50% tier)

Acquired in 2026 and sold at three years, the new OBBBA 50% tier excludes $1,950,000. The other half is Section 1202 gain taxed at 28% plus NIIT, so the real saving is about $308,100 — not half the full-rate tax.

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Big exit — cap binds, California

$200k basis, $30M sale, acquired 2026, held 5 years, California

Cost basis / sale $200,000 / $30,000,000 Cap / state $15M cap · California

The $30M gain tops the $15M per-issuer cap, so $15,000,000 is excluded and the rest is taxed normally — about $3,570,000 saved federally. But California does not conform, clawing back roughly $1,995,000 in state tax.

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Deep Dive

QSBS after OBBBA: how much startup gain you can actually keep

5 chapters · 4 min read

Section 1202 can make millions of dollars of startup-stock gain completely tax-free — but it is riddled with tests, and the 2025 One Big Beautiful Bill Act split it into two regimes that turn on a single date. This walkthrough covers the holding-period tiers, the per-issuer cap, the eligibility traps that disqualify most companies, and the states that tax the gain anyway.

What QSBS is — and the two regimes

Section 1202 lets a non-corporate holder exclude gain on qualified small business stock: original-issue C-corporation stock in a company that passed a gross-assets test and ran an active qualified trade. OBBBA, enacted July 4, 2025, rewrote it only for stock acquired after that date. Older stock keeps the prior rules. That one date decides your holding-period tiers, your cap, and your gross-assets ceiling.

The holding-period tiers

Under the old rules the exclusion is all-or-nothing: hold more than five years and you exclude 50%, 75%, or 100% depending on when you bought (post-September 2010 stock gets 100%); sell earlier and Section 1202 gives you nothing. OBBBA added a gentler ramp for new stock — 50% at three years, 75% at four, and 100% at five — so a partial exit no longer means zero exclusion.

The per-issuer cap

Your exclusion from one company is capped at the greater of a dollar figure — $10 million pre-OBBBA, raised to $15 million for new stock — or ten times your adjusted basis. Founders with tiny basis lean on the dollar cap; investors who paid a lot can exceed it via the 10x-basis path. Gain above the cap is ordinary long-term capital gain at your regular rate.

The rate on the part you don't exclude

A subtlety most calculators miss: when your exclusion is only 50% or 75%, the taxable half is Section 1202 gain taxed at a 28% maximum rate (plus the 3.8% net investment income tax), not the usual 15% or 20%. That is why holding to the 100% tier is worth far more than the headline percentages suggest — and why this tool computes the real tax saved rather than simply multiplying the excluded amount by your rate.

Eligibility traps and state conformity

Many businesses never qualify: S-corps and LLCs are out, service businesses (health, law, consulting, finance) are excluded, and the company must have had under $50M/$75M in gross assets at issuance. Even when the federal exclusion applies, a handful of states do not conform — California, Pennsylvania, Alabama, and Mississippi tax the excluded gain anyway. Because QSBS is easy to blow, confirm your facts with a specialist before relying on any estimate.

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Questions

Frequently Asked Questions

8 questions

What is QSBS and Section 1202?+

Qualified small business stock is original-issue C-corporation stock in a company that passed the gross-assets test and ran a qualified active trade. Section 1202 lets you exclude a large share of the gain when you sell it after holding long enough.

How much of my gain can I exclude?+

Up to 100% if you hold long enough — a full five years under either regime. Stock acquired after July 4, 2025 also gets 50% at three years and 75% at four. The excludable amount is then capped per issuer.

What is the per-issuer cap?+

The exclusion from one company is limited to the greater of a dollar cap — $10 million for older stock, $15 million for stock acquired after July 4, 2025 — or ten times your adjusted basis in the stock. Gain above the cap is taxed normally.

What did OBBBA change in 2025?+

For stock acquired after July 4, 2025, the One Big Beautiful Bill Act added partial exclusions at three and four years, raised the dollar cap from $10M to $15M, and lifted the gross-assets ceiling from $50M to $75M. Older stock keeps the prior rules.

Do I qualify for the exclusion?+

You need original-issue stock in a domestic C-corporation that had gross assets under $50M/$75M at issuance and ran a qualified (non-service) active business. S-corps, LLCs, and most service firms do not qualify. Confirm eligibility with a tax advisor.

How is the part I don't exclude taxed?+

When your exclusion is 50% or 75%, the taxable half is Section 1202 gain taxed at a 28% maximum rate plus the 3.8% net investment income tax — not the usual 15% or 20% long-term rate. Gain above the per-issuer cap is taxed at your ordinary long-term rate.

Does my state conform to Section 1202?+

Most states with an income tax follow the federal exclusion, so the excluded gain is state-tax-free. California, Pennsylvania, Alabama, and Mississippi do not conform and tax it anyway. Eight states have no income tax on the gain at all.

Can both founders and employees use QSBS?+

Yes. Any non-corporate holder — founders, early employees who exercised options, and direct investors — can claim the exclusion if the stock itself qualifies and they meet the holding period. Each holder has their own per-issuer cap.

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QSBS Exclusion Calculator (Section 1202)

Your QSBS exclusion

Holding-period tiers — sell now or hold longer?

Sell now vs hold to the next tier

Does your state tax the excluded gain?

How to Use This Calculator

Enter your cost basis and sale proceeds

Enter the acquisition and sale dates

Add gross assets and your tax rate

Read the exclusion, then the other tabs

Formula & Methodology

Trust, Methodology & Sources

Key Terms Explained

Real-World Examples

Founder — pre-OBBBA, five-year hold

Early employee — post-OBBBA, three-year hold

Big exit — cap binds, California

QSBS after OBBBA: how much startup gain you can actually keep

What QSBS is — and the two regimes

The holding-period tiers

The per-issuer cap

The rate on the part you don't exclude

Eligibility traps and state conformity

Frequently Asked Questions

Get a branded PDF of your results

QSBS Exclusion Calculator (Section 1202)

Your QSBS exclusion

Holding-period tiers — sell now or hold longer?

Sell now vs hold to the next tier

Does your state tax the excluded gain?

How to Use This Calculator

Enter your cost basis and sale proceeds

Enter the acquisition and sale dates

Add gross assets and your tax rate

Read the exclusion, then the other tabs

Formula & Methodology

Trust, Methodology & Sources

Key Terms Explained

Real-World Examples

QSBS after OBBBA: how much startup gain you can actually keep

What QSBS is — and the two regimes

The holding-period tiers

The per-issuer cap

The rate on the part you don't exclude

Eligibility traps and state conformity

Frequently Asked Questions

Get a branded PDF of your results

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