QSBS Calculator — Section 1202 Under the New Rules – Signed

The One Big Beautiful Bill Act rewrote Section 1202 for stock acquired after July 4, 2025. Those shares get a tiered exclusion — 50% at three years, 75% at four, 100% at five — instead of all-or-nothing at five years. The per-issuer cap rose from $10 million to $15 million, the company's gross assets ceiling rose from $50 million to $75 million, and the AMT preference on partial exclusions was struck. Stock acquired on or before July 4, 2025 keeps the old rules in full.

The acquisition date decides it, not the sale date. Stock acquired after July 4, 2025 is on the new tiered regime for its whole life. Stock acquired on or before that date stays on the old regime even if you sell it in 2035. An investor holding both is running two rulebooks at once.

For 100% of the gain, yes. What changed is that a shorter hold is no longer worth nothing: post-OBBBA stock sold at three years excludes half the gain, and at four years three quarters. Pre-OBBBA stock sold at four years and eleven months still excludes nothing.

It is long-term — three years clears the one-year test easily. But long-term capital gain isn't taxed at a single rate. Section 1(h) sorts it into bands, and gain that qualifies as QSBS without being excluded is "Section 1202 gain," which lands in the 28% band rather than the 20% one. With the 3.8% net investment income tax on top, the non-excluded half of a three-year sale is taxed at roughly 31.8%. It's the reason a 50% exclusion saves less than half your tax bill. The 28% is a ceiling and not a surcharge, so a seller below the top bracket pays their ordinary rate instead.

A SAFE or convertible note isn't stock, so the Section 1202 clock generally doesn't start until it converts into qualifying stock at the priced round. Investors regularly measure from the wire date and come up years short. Use the conversion date here.

Yes. Section 1202 tests the stock, not your job title, and the statute never mentions employment. An employee who exercises options and holds the resulting shares clears the same bar an angel does, on the same tiers. The per-issuer cap is per taxpayer, so you get your own $10 million or $15 million — it isn't a slice of one ceiling shared across the cap table. What catches employees isn't eligibility, it's the date the clock starts.

The day you exercise. Not the grant date, not the vesting date, and not your start date. Option shares are issued to you when you pay for them, so someone who joined at seed, vested over four years, and exercised the week the acquisition closed has held QSBS for days. Early exercise with an 83(b) election starts the clock immediately, which is most of the reason it's worth doing.

It can, and this one is quieter than the holding period. The company's gross assets are tested when the stock is issued — which for options means the day you exercise, not the day you were granted them. Join when the company has $8 million on the books, exercise after it has crossed $50 million (or $75 million for shares issued after July 4, 2025), and the stock may never have been QSBS at all. Holding it for five years afterward doesn't fix that. It's an argument for exercising early that has nothing to do with the strike price.

Rarely. An RSU isn't stock until it settles, so both the holding period and the gross assets test land on the settlement date. At most companies that's at or after an IPO — long past the asset ceiling, and five years from a liquidity event you've already had. RSUs can qualify in principle, but in practice QSBS is an options question, which is why it mostly matters at companies still small enough to be issuing them.

What you paid, plus any spread you've already paid ordinary income tax on. Exercise an NSO and the spread is W-2 income that year, so your basis is the full fair market value on the exercise date. Exercise an ISO and hold it through a qualifying disposition and your basis is just the strike — the spread is an AMT item, not regular-tax basis. Basis does double duty in Section 1202: it sets the gain, and it sets the 10× floor under the per-issuer cap.

No. Section 1202 requires original issuance — the shares have to come from the company itself. Buying a colleague's stock in a tender or on a secondary market makes you a secondary purchaser, and the exclusion doesn't travel with the shares no matter how long you then hold them. Selling into a tender is the opposite case: that's a sale, and if your own shares qualified it's exactly what this calculator prices. Note that a company buying back its own stock near the time other shares are issued can void QSBS for those shareholders under the redemption rules, which is worth raising with a CPA.

As of August 2026: California, Pennsylvania, Alabama, Mississippi, and — new this year — Oregon, which decoupled entirely for sales on or after January 1, 2026 under SB 1507. Hawaii conforms only to the old 50% exclusion. Everyone else follows the federal number, because conforming states start from federal income and gain the exclusion removes never arrives. New Jersey went the other way and conformed on January 1, 2026, and DC decoupled by emergency act before Congress disapproved it. This is the most volatile part of QSBS right now.

California decoupled from Section 1202 in 2013 and never came back, so it taxes the entire gain at up to 13.3% no matter how long you held. On a $3 million gain that's roughly $399,000 the federal exclusion does nothing about. For most California angels it's the largest number missing from a QSBS estimate, and it doesn't shrink by waiting.

Section 1202 almost certainly isn't your rule. The exclusion is written for US taxpayers, and a non-resident alien generally isn't subject to US tax on gain from selling stock at all — unless the gain is effectively connected to a US trade or business, or you were in the US 183 days or more in the year of sale. There's usually no US tax for the exclusion to remove. Your home country's rules, and any treaty with the US, are what govern. US citizens and green card holders abroad are still US taxpayers and Section 1202 applies to them normally.

A Section 1045 rollover can carry the holding period forward. If you've held QSBS more than six months, you can roll the proceeds into newly issued QSBS within 60 days of the sale and the original holding period comes with it. It's a hard deadline, and missing it is expensive.