QSBS Tax Exemption Calculator
Calculate your Section 1202 capital gains exclusion. Model the greater of $10M or 10x cost basis limit, holding period eligibility, and state tax conformity.
Stock Acquisition & Exit Parameters
Model federal Section 1202 capital gains exclusion and state conformity.
Unlocking Zero Federal Capital Gains with Section 1202 QSBS
Internal Revenue Code Section 1202 permits non-corporate founders, early employees, and angel investors to exclude up to 100% of capital gains upon the sale of Qualified Small Business Stock (QSBS). With an exclusion limit equal to the greater of $10,000,000 or 10 times the original cost basis, QSBS is the single most powerful wealth preservation vehicle in modern venture capital and startup finance.
Key Wealth & Tax Features
100% / 75% / 50% Statutory Tiers
Accurately applies statutory exclusion rates based on stock acquisition dates between 1993 and present day.
Greater of $10M or 10x Basis Rule
Models Section 1202(b) gain caps, allowing large early investments to exclude tens of millions in capital gains.
State Tax Conformity Tracking
Flags non-conforming states like California, New York, and New Jersey that levy state capital gains tax despite federal exemptions.
Net Investment Income Tax (NIIT) Savings
Calculates complete avoidance of both the 20% federal capital gains rate and the 3.8% Affordable Care Act NIIT.
Five-Year Holding Period Validation
Verifies that shares satisfy the statutory 5-year holding rule or models Section 1045 rollover opportunities.
Audit Summary Export
Export executive tax calculations ready for your CPA, wealth manager, or tax attorney.
Strategic Financial Applications
- ✓Startup Founders & Co-Founders
Plan company exit strategies and model after-tax distributions before closing M&A or IPO liquidity events.
- ✓Early Tech Employees
Evaluate the net after-tax value of early exercised stock options (ISOs/NSOs) qualifying under QSBS rules.
- ✓Angel Investors & Seed VCs
Maximize portfolio returns by verifying Section 1202 compliance across early-stage equity investments.
- ✓High-Net-Worth Wealth Advisors
Design tax-sheltered gifting and trust transfer strategies to multiply Section 1202 exclusions across family trusts.
Frequently Asked Questions
What is Section 1202 QSBS?
Section 1202 of the Internal Revenue Code allows investors and founders who hold Qualified Small Business Stock for more than 5 years to exclude up to 100% of federal capital gains from federal income tax upon sale.
What is the maximum gain that can be excluded under QSBS?
For each taxpayer, the cumulative limit on eligible gain from a single corporate issuer is the greater of $10,000,000 or 10 times the taxpayer's aggregate adjusted tax basis in the stock.
Does California or New York recognize the QSBS tax exemption?
No. California, New York, New Jersey, and Pennsylvania are notable non-conforming states. While your capital gain is 100% exempt from federal tax, you must still pay state income tax (up to 13.3% in CA) on the full gain.
What requirements must a company meet to issue QSBS?
The company must be a domestic C-corporation, must have aggregate gross assets under $50 million at all times before and immediately after the stock issuance, and at least 80% of corporate assets must be used in the active conduct of a qualified trade or business (excluding banking, hospitality, farming, and professional services).
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