The QSBS exemption explained
Qualified Small Business Stock can exclude millions of gain from federal tax — if every condition is met.
The core requirements
C-corporation stock acquired at original issuance, gross assets under the statutory threshold at issuance, an active qualified trade or business, and a five-year holding period.
The benefit
Eligible gain is excluded from federal income tax up to the greater of $10 million or ten times basis, with recent legislation adding tiered exclusions at shorter holding periods. Not all states conform.
Why exercise timing matters
The five-year clock starts when you acquire the stock, meaning at exercise — not at grant. Exercising early can be the difference between full exclusion and none.
Educational content, not tax advice. Your outcome depends on your grant documents, income and state. Equity Tax Engine models your actual position — join the waitlist.