QSBS Calculator — Section 1202 Exclusion After OBBBA

2026 New

See how much of a startup stock sale Section 1202 excludes: the new 50/75/100% tiers for stock bought after July 4, 2025, the $15 million or 10× basis cap, the 28% rate on the rest and the tax saved.

By Konstantin Iakovlev · Updated September 2026 · Source: IRC §1202 as amended by Public Law 119-21 §70431; IRC §1(h)

$
$
$

Gain excluded

$15,000,000

Federal tax on the sale

$1,179,315

Saved by Section 1202

$3,570,000

How the gain is taxed

Rules that applyAcquired after July 4, 2025: 50% after 3 years, 75% after 4, 100% after 5
Exclusion for your holding period100%
Total gain$20,000,000
Cap: greater of the dollar limit or 10 × basis$15,000,000
Gain eligible for the exclusion$15,000,000
Excluded$15,000,000
Gain taxed at 0/15/20% (above the cap or not qualified)$5,000,000
Income tax on the gain$989,315
Net investment income tax (3.8%)$190,000
Federal tax on the sale$1,179,315
Without the exclusion$4,749,315

The $15 million cap for new stock and the $75 million gross-assets test are indexed for inflation from 2027; this calculator holds them at the 2026 amounts. A sale at 50% or 75% uses the full eligible gain against the cap, not just the excluded half. Gain above the cap is ordinary long-term capital gain. The company must have been a C corporation with gross assets under the limit when the stock was issued, and you must have bought the stock at original issue.

Use the QSBS Calculator — Section 1202 Exclusion After OBBBA above to calculate your results. Enter your values and see instant results — all calculations run in your browser.

Disclaimer: This calculator is for informational purposes only and does not constitute tax, financial, or legal advice. Results are estimates based on the information you provide and current rates. Always consult a qualified tax professional or financial advisor for advice specific to your situation.

How It Works

Section 1202 lets you exclude gain on qualified small business stock: shares you bought at original issue from a C corporation whose gross assets were under the limit when the stock was issued. The One Big Beautiful Bill Act changed the rules for stock acquired after July 4, 2025: 50% of the gain is excluded after 3 years, 75% after 4 and 100% after 5, the per-company cap rose to $15 million or 10 times your basis, and the gross-assets limit rose to $75 million. Stock acquired earlier keeps the old rules: 100% for stock bought after September 27, 2010, but only if held more than five years.

The acquisition date decides which rules apply, and it carries over through gifts, inheritances and Section 1045 rollovers, so old stock cannot be moved into the new tiers. The cap is the greater of the dollar limit, reduced by gain from the same company excluded in earlier years, or 10 times the basis of the shares sold. A sale at 50% or 75% uses the full eligible gain against the cap, not just the excluded part.

The part of the eligible gain that is not excluded is "section 1202 gain" and is taxed at up to 28%; gain above the cap is ordinary long-term capital gain at 0%, 15% or 20%. Both count for the 3.8% net investment income tax. Only stock acquired before September 28, 2010 carries an AMT preference. California and Pennsylvania do not follow Section 1202, so the whole gain is taxed on those state returns; New Jersey follows it from 2026.

Example: $20 Million Gain on Stock Bought in August 2025

  1. 1 Input: a founder filing jointly with $400,000 of other taxable income acquired shares on August 1, 2025 with a $1,000,000 basis and sells them for $21,000,000.
  2. 2 Held 5 years (sold August 1, 2030): 100% exclusion, capped at the greater of $15,000,000 or 10 × $1,000,000, so $15,000,000 is excluded and $5,000,000 is taxed as long-term gain.
  3. 3 Federal tax: $1,179,315, against $4,749,315 with no exclusion, a saving of $3,570,000.
  4. 4 Earlier sales: at 4 years (75%) the tax would be $2,382,358, and at 3 years (50%) $3,574,858, because the non-excluded part is taxed at 28%.

Source: IRC §1202 as amended by Public Law 119-21 §70431; IRC §1(h) · Last updated: September 2026

Frequently Asked Questions

What changed for QSBS in 2025?
For stock acquired after July 4, 2025, the One Big Beautiful Bill Act excludes 50% of the gain after 3 years, 75% after 4 and 100% after 5, raises the per-company cap to $15 million or 10 times basis, and raises the gross-assets limit to $75 million. Stock acquired earlier keeps the old rules.
How is the part of QSBS gain that is not excluded taxed?
The non-excluded part of eligible gain is taxed at up to 28%, and gain above the per-company cap is ordinary long-term capital gain at 0%, 15% or 20%. Both are subject to the 3.8% net investment income tax.
Does gifting or inheriting QSBS change the rules?
No. The recipient takes over the original acquisition date and holding period, so stock bought before July 5, 2025 stays under the old rules even after a gift, inheritance or Section 1045 rollover.
Do states follow the QSBS exclusion?
Most do, but California and Pennsylvania tax the whole gain, and Alabama and Mississippi are reported not to follow it. New Jersey follows the federal exclusion from tax year 2026.

You might also need

Federal Income Tax Calculator 2026 — Free IRS Tax Estimator

Calculate your 2026 federal income tax, bracket, effective rate, FICA, and take-home pay. Free, instant results based on official IRS rates and brackets.

Capital Gains Tax Calculator 2026 — Short & Long-Term Rates

Calculate short-term and long-term capital gains tax on stocks, real estate, and investments. Includes NIIT. Free, instant results based on 2026 IRS brackets.

Child Tax Credit Calculator 2026

Calculate your Child Tax Credit and Other Dependent Credit. See phase-out thresholds and net credit amount for your income.