Eligibility checklist
- ✓Issuer is a domestic C-corp
- ✓Gross assets ≤ $50M at issuance (and immediately after)
- ✓Held at least 5 years
- ✓Acquired at original issuance (not from another shareholder)
- ✓Issuer ran an active qualified business 80% of holding period
- ✓Acquisition date qualifies — 100% exclusion
Stock issued after July 4, 2025 has tiered partial exclusions: 50% at 3 years held, 75% at 4 years, 100% at 5+, with a higher $15M cap and a $75M gross-assets threshold. Older stock follows the legacy "5 years for 100%, $10M / 10× basis cap" rule. This tool applies the older rules — for post-2025 grants, double-check with a tax pro.
- Confirm the company was a C-corp at issuance AND continuously through your holding period.
- Get written confirmation of gross assets ≤ $50M (or $75M for post-2025) at issuance and immediately after.
- Document that the company spent 80%+ of assets on active qualified business operations.
- If you live in CA/NJ/PA/MS/AL, model residency-change planning before the sale.
- For multiple lots: ask about per-issuance election and Section 1045 rollover.
- Founders: confirm 83(b) was filed within 30 days of any restricted-stock grant.
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The math above is deterministic. AI explains what it means — it never recalculates the numbers.
About
Qualified Small Business Stock (Section 1202) can make up to $10M of gain — or 10× your basis — federally tax-free. This checker walks through the eligibility tests and shows your potential tax savings.
How it works
- 01Confirm the issuer is a domestic C-corp.
- 02Check that gross assets were ≤ $50M when shares were issued.
- 03Confirm you've held the shares ≥ 5 years.
- 04If all tests pass, exclusion = min(gain, max($10M, 10× basis)).
Examples
Founder with $50k basis
Founder bought stock at incorporation for $50k. Holds 7 years. Sells for $15M. 10× basis = $500k, less than the $10M floor — so $10M is excluded, $5M is taxable LTCG.
Employee exercises early
Engineer exercises options at $1 strike for 100k shares ($100k basis), holds 6 years, sells for $5M. Full $4.9M gain is excluded — saving ~$1.17M in federal tax.