QSBS Exclusion Calculator

Estimate the federal (and state) tax savings from IRC § 1202 qualified small business stock. Models both regimes: stock acquired on or before July 4, 2025 (pre-OBBBA: $10M cap, 5-year hold for 100%) and after (post-OBBBA: tiered 50/75/100% exclusion at 3/4/5 years, $15M cap).

Assumes all § 1202 eligibility requirements are met — C-corp, original issuance, gross asset ceiling at issuance, qualified active business. See the full QSBS guide for eligibility details. Not tax or investment advice.

The two § 1202 regimes: pre- and post-OBBBA

The One Big Beautiful Bill Act (OBBBA, P.L. 119-21, July 4, 2025) significantly expanded § 1202. Which rules apply depends on when the stock was issued — not when you plan to sell.¹

Rule	Stock acquired ≤ July 4, 2025	Stock acquired after July 4, 2025
Per-issuer exclusion cap	Greater of $10M or 10× basis	Greater of $15M or 10× basis (inflation-indexed from 2027)
Holding period / exclusion %	5 years → 100%	3 yrs → 50% · 4 yrs → 75% · 5 yrs → 100%
Gross asset ceiling at issuance	$50M	$75M (inflation-indexed from 2027)

The tiered structure changes PE exit math. Under pre-OBBBA rules, a PE co-invest sold after 4 years — a typical fund cycle — gave you zero § 1202 benefit. Under post-OBBBA rules, a 4-year hold now delivers a 75% exclusion on up to $15M of gain. On a $10M gain that's $1.785M in federal tax savings that didn't exist before July 2025.

PE-specific eligibility points

Carried interest and profits interests are not QSBS. Only direct C-corporation stock qualifies. Your fund carry — regardless of how long you've held it — does not qualify.²
Original issuance only. Stock must be acquired directly from the corporation — not from another shareholder, not on the secondary market. This affects rollover equity and certain co-invest structures — see the QSBS guide for which ones qualify.
Gross asset ceiling at issuance, not at sale. Pre-OBBBA: $50M. Post-OBBBA: $75M. The test is applied at the time the stock is issued. PE portfolio companies grow, but what matters is whether they were below the ceiling when you received the stock.
C-corporation throughout substantially all of your holding period. S-corps, LLCs, and partnerships don't qualify. If the portfolio company converts entity type, it can break the eligibility.
California and New York do not conform to § 1202. State income tax applies to the full gain regardless of the federal exclusion. On a $10M QSBS exclusion, a CA resident pays an additional $1.33M in state taxes that a TX or FL resident does not.

Stacking multiplies the per-issuer cap. Each taxpayer gets their own cap. A married couple filing jointly each get $15M — $30M combined per issuer. A non-grantor trust is its own taxpayer with another $15M cap. PE professionals who anticipated a large direct-equity exit and set up trusts years in advance have used stacking to multiply tax-free gain 3–5×. See the trust stacking section in the full QSBS guide. Stacking must be set up before the exit; it can't be done retroactively.

State conformity and residency timing

CA and NY residents pay state income tax on the full gain — § 1202 provides no state-level benefit in those states. If you're a CA or NY resident with a significant QSBS position and a liquidity event on the horizon, state residency planning may be worth modeling alongside the federal exclusion. A domicile change to a zero-state-tax jurisdiction before the distribution date can be worth seven figures on a large exit. See the state residency guide for the specific CA FTB sourcing rules and the NY 183-day trap.

Related tools and guides

QSBS Planning for PE Professionals — Full Guide — eligibility, stacking, rollover equity, co-invest structuring
Co-Investment Rights: Tax Treatment and QSBS Opportunities — when co-invest escapes § 1061 and qualifies for § 1202
PE Liquidity Event: The 90-Day Tax Window — pre-distribution checklist and post-distribution planning
State Tax Residency Planning for PE Professionals — CA FTB sourcing, NY 183-day trap, domicile change
Carried Interest After-Tax Calculator — model carry after-tax under § 1061 LTCG vs. ordinary rates
Match with a PE wealth specialist

Model your actual QSBS situation

The calculator assumes all § 1202 eligibility conditions are satisfied. A PE specialist will verify your specific structure (co-invest docs, grant agreements, entity type at issuance), confirm the holding period, identify stacking opportunities, and coordinate QSBS timing with your carry planning, state residency, and estate plan. Free match, no obligation.

Sources

Tax Adviser: "QSBS gets a makeover: What tax pros need to know about Sec. 1202's new look" (Nov 2025) — Documents OBBBA amendments to § 1202: $15M cap (inflation-indexed from 2027), tiered holding 3/4/5 years at 50/75/100%, $75M gross asset ceiling. Effective for stock acquired after July 4, 2025.
IRC § 1202 — Partial exclusion for gain from certain small business stock — Cornell LII. Core eligibility: domestic C-corp, original issuance, gross asset ceiling, active qualified business, non-corporate holder.
McLane Middleton: "OBBBA Changes to the QSBS Regime under Section 1202" (2025) — Comprehensive overview of effective dates, tiered exclusion mechanics, and gross asset ceiling changes.
Davis Wright Tremaine: "QSBS Just Got a Major Upgrade" (July 2025) — Analysis of OBBBA QSBS changes including the new tiered holding period structure and practical planning implications.

Tax values verified May 2026. OBBBA § 1202 amendments per P.L. 119-21. 2026 LTCG rate (20%) and NIIT rate (3.8%) per IRS Rev. Proc. 2025-32 and IRC § 1411. State conformity information current as of May 2026 — verify state treatment with a state tax advisor before relying on it.