Financial advisors for QSBS planning.
QSBS can exclude millions of dollars of gain, but the benefit depends on issuance facts, C corporation status, gross assets, original issuance, holding period, active business requirements, state conformity, gifting history, and sale timing.
Questions to answer before the money moves
Startup founders, early employees, angel investors, and business owners who may hold qualified small business stock and are approaching a tender offer, acquisition, secondary sale, or IPO liquidity event.
- Do my shares qualify for Section 1202 treatment?
- How much gain could be excluded under the 10x basis or $10M cap?
- Should I gift QSBS before a sale to use additional exclusions?
- Which states do not conform to the federal QSBS exclusion?
Start with the numbers
QSBS Exclusion Calculator
Estimate the potential Section 1202 exclusion under the greater of $10M or 10x basis and compare eligible versus taxable gain.
Section 1202 Checklist
A founder-friendly checklist for documents, holding period, active business facts, state conformity, gifting, and sale timing.
Gifting and Stacking Guide
How to multiply the Section 1202 exclusion across family members and trusts — timing rules, gift tax mechanics, and the IRS stacking warning.
State Conformity Guide
Which states do not conform to the federal exclusion, how California, Pennsylvania, and others treat QSBS gain, and planning options for non-conforming residents.
How to Choose a QSBS Advisor
What to look for in a fee-only advisor, questions that reveal real expertise, red flags, and how to prepare for the first meeting before a transaction closes.
Post-Exit Investing Guide
What to do with the proceeds after a QSBS exit: tax reserves, Section 1045 windows, investment policy, diversification, charitable planning, and estate integration.
Holding Period Guide
When the 5-year clock starts for founders, option-holders, and investors — and what hedging, mergers, or an 83(b) miss can do to your clock.
QSBS and AMT Guide
Does Section 1202 gain trigger alternative minimum tax? Depends on your exclusion tier. Most post-2010 founders owe no AMT — but ISO exercises and high base income can still create exposure.
Does My Stock Qualify?
The eight tests your shares must pass for Section 1202 treatment — C corporation, gross assets, active business, original issuance, holding period, and what OBBBA changed for post-July 2025 stock.
Section 1045 Rollover Guide
Sold QSBS before the five-year mark? You may be able to defer the gain by reinvesting in new qualified stock within 60 days — with holding period tacking toward the §1202 exclusion.
QSBS for Early Employees
RSAs, ISOs, and NSOs can qualify — RSUs generally cannot. Why equity type matters, how the 83(b) election affects your clock, and what multiple exercise lots mean for your exit tax.
Tender Offer and Secondary Sale Guide
How Section 1202 applies when you sell before a full company exit — plus the corporate redemption trap that can quietly taint other shareholders' QSBS.
QSBS for Angel Investors
Section 1202 rules for outside investors — the gross assets timing trap, investing through funds and syndicates under §1202(g), multi-round basis stacking, and documentation to request from companies.
QSBS and Trusts Guide
How grantor and non-grantor trusts affect your Section 1202 exclusion — stacking with irrevocable trusts, GRATs, CRTs, and California trust planning for non-conforming states.
QSBS for Startup Founders
Why founders are best-positioned for the §1202 exclusion — C Corp timing, 83(b) elections, co-founder stacking, vesting acceleration, and the pre-LOI planning window that determines the outcome.
QSBS at IPO
What happens to your Section 1202 exclusion when your startup goes public — preferred-to-common conversion, the lockup hedging trap, lot selection at expiry, and state residency timing.
QSBS in an Acquisition
Cash mergers, stock-for-stock reorganizations, the §1202(h)(4) carryover, mixed consideration, earnouts, and the redemption trap that can quietly taint exclusions for all shareholders.
QSBS Charitable Planning
How donating QSBS shares to a DAF or charitable remainder trust can eliminate gain entirely — often better than the §1202 exclusion for philanthropic founders. Timing, deduction limits, CRT mechanics, and state tax interaction.
QSBS Documentation Guide
What records to collect at issuance, maintain during the holding period, and present at a transaction — including 83(b) election proof, attestation letters, and how to reconstruct missing documents.
QSBS Excluded Industries
Which businesses can't issue QSBS — and how borderline companies (healthcare IT, fintech, software-plus-consulting) are analyzed under the §1202(e)(3) qualified-trade-or-business test.
83(b) Election and QSBS
How the §83(b) election starts the five-year QSBS clock at grant instead of vesting — the 30-day deadline, which equity types apply, the ordinary income trade-off, and what happens if you miss it.
QSBS and SAFEs: When Does the Clock Start?
A SAFE is a contract, not stock — the Section 1202 five-year holding period begins at equity conversion, not at SAFE signing. The gross assets test also applies at conversion, creating a trap for investors in fast-growing companies.
QSBS in California
California does not conform to Section 1202. Every dollar of QSBS gain is taxable in California at up to 13.3% — regardless of your federal exclusion. What that costs and what to do about it.
QSBS for LLCs and S-Corps
LLCs and S-Corps cannot issue QSBS directly — but check-the-box elections and statutory conversions can start the clock. S-Corp founders face a stricter rule: old shares are permanently ineligible; only new C-Corp stock issued after termination qualifies.
How to Report QSBS on Your Tax Return
Form 8949 code Q, Schedule D, AMT preference item rules, NIIT interaction, California add-back, and the six most common filing mistakes that trigger IRS notices.
QSBS After OBBBA: What Changed in 2025
The One Big Beautiful Bill Act raised the exclusion cap to $15M, introduced tiered 3/4/5-year exclusions for new stock, and raised the gross assets threshold to $75M. Full breakdown of the changes.
ISOs and QSBS: Do Options Qualify?
Incentive stock options can qualify for Section 1202 — but the holding period starts at exercise, AMT exposure comes from two independent sources, and the $100K annual ISO limit affects which options retain favorable treatment.
QSBS for Advisors and Board Members
Advisor and board member equity can qualify for Section 1202 — but only if the right equity type is used and the gross assets test is met at issuance. RSAs beat warrants; timing is everything.
QSBS in New York State and NYC
New York currently conforms to Section 1202 — unlike California. Both state and city taxes are excluded on qualifying exits. But a 2026 retroactive decoupling proposal was withdrawn, not defeated. What NYC founders need to know.
QSBS in Massachusetts
Massachusetts conforms to Section 1202 — unlike California. But the OBBBA enhancements ($15M cap, tiered holding) may not apply at the state level due to MA's static IRC reference date. What Boston and Cambridge founders need to know.
QSBS in Washington State
Washington currently conforms to Section 1202 — QSBS-excluded gains are outside the state's capital gains tax base. But SB 6229 would have reversed that in 2026. The bill failed without a floor vote. What Seattle founders need to know before the next session.
QSBS in Illinois
Illinois conforms to Section 1202 via rolling conformity — the OBBBA's $15M cap and tiered holding periods apply automatically at the state level, unlike Massachusetts. What Chicago and Illinois founders need to know before a liquidity event.
QSBS in Texas
Texas has no state income tax — the Section 1202 exclusion is fully effective and there is no state tax to plan around. What Austin, Houston, and Dallas founders need to know, including the California domicile trap for recent transplants.
QSBS in Florida
Florida has no state income tax — the Section 1202 exclusion is fully effective with no state tax to plan around. But Florida's healthcare, biotech, and fintech ecosystem makes the §1202(e)(3) excluded-industries analysis especially important. What Miami, Tampa, and Orlando founders need to know.
QSBS in New Jersey
New Jersey conformed to Section 1202 in 2026 (A4455) — the first time NJ has recognized the federal exclusion. At 10.75% with no preferential LTCG rate, NJ conformity can save founders over $1.6M in state tax on a $15M exit. Even holders of pre-2026 stock benefit on 2026+ dispositions.
QSBS in Pennsylvania
Pennsylvania does not conform to Section 1202 — every dollar of QSBS gain is taxable at the 3.07% flat state rate regardless of the federal exclusion. Philadelphia's School Income Tax does not apply to QSBS gains. The residency-change math is different from California, and neighboring New Jersey's 2026 conformity changed the cross-border calculus.
QSBS in Colorado
Colorado conforms to Section 1202 via rolling conformity — the OBBBA's $15M cap and tiered holding periods apply automatically at the state level. At a flat 4.4% rate, the exclusion saves Boulder and Denver founders up to $660,000 in state tax on a $15M qualifying exit.
QSBS in Oregon — New Non-Conforming State (2026)
Oregon signed SB 1507 on April 9, 2026, decoupling from Section 1202 retroactive to January 1, 2026. QSBS gains excluded federally are now fully taxable in Oregon at up to 9.9%. Portland founders face additional Multnomah and Metro surcharges that push the combined rate above 13%. What the decoupling means, planning options, and the referendum track.
QSBS FAQ: 25 Questions Answered
Eligibility, exclusion limits, OBBBA changes, AMT, state conformity, gifting strategies, and when to hire a financial advisor — in plain language.
QSBS in Georgia
Georgia updated its IRC conformity via HB 1199 (March 2026), fully incorporating the OBBBA's $15M cap and tiered holding periods. At a flat 4.99% rate, the exclusion saves Atlanta founders up to $748,500 in state tax — but fintech and healthcare sectors face excluded-industry traps.
QSBS in Minnesota
Minnesota updated its IRC conformity to May 1, 2026 via H.F. 2438, capturing the OBBBA's $15M cap and tiered holding periods. At a top rate of 9.85%, the exclusion saves Medical Alley founders up to $1.48M in state tax — but device and life sciences companies face critical §1202(e)(3) excluded-industry analysis.
QSBS in Virginia
Virginia replaced rolling IRC conformity with a fixed date of December 31, 2025 — capturing OBBBA's $15M cap and tiered holding periods. At a 5.75% top rate, the exclusion saves NoVA founders up to $862,500 in state tax. But defense tech, cybersecurity, and government contracting companies face a critical §1202(e)(3) consulting-exclusion analysis.
Talk to a QSBS advisor
Use the form if a transaction, tender offer, or founder liquidity event could make QSBS planning material.
The value is in the facts, not the acronym
QSBS planning starts with the issuance record, company status, holding period, shareholder, and state. If those facts line up, the next question is how to coordinate gifting, charitable planning, sale timing, and the post-exit portfolio.
Founder liquidity needs coordinated advice
A CPA can model taxes and an attorney can review documents. A fee-only advisor can put the exclusion, estate plan, charitable plan, cash reserve, and long-term investment policy in one coordinated liquidity plan.
How the right advisor helps
- Model the decision. Convert the event into cash-flow, tax, liquidity, and risk numbers before irreversible choices are made.
- Coordinate the team. Align the financial plan with the CPA, attorney, lender, trustee, or transaction professional already involved.
- Write the policy. Decide what can be spent, invested, gifted, donated, or deferred so pressure does not become the plan.
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