QSBS calculator: 50/75/100% exclusion and the $15M cap
The exclusion is no longer a single number. Enter the holding period and the acquisition date, and the tier, cap and tax fall out.
Updated November 4, 2026 Sources and methodology
The three tests before any exclusion applies
- Qualified small business. A domestic C corporation whose gross assets never exceeded $75 million (indexed after 2026) at issuance or immediately after.
- Qualified trade or business. Service firms, banking, insurance, financing, farming, mining, hotels and restaurants do not qualify.
- Holding period. At least 3 years for the new tiers, more than 5 for stock acquired before July 5, 2025.
The tier table the statute now uses
| Years held | Exclusion |
|---|---|
| Less than 3 | 0% (still a capital gain) |
| 3 years | 50% |
| 4 years | 75% |
| 5 years or more | 100% |
Two ceilings apply at once: the exclusion percentage and the per-issuer dollar cap: the greater of $15 million ($10 million for stock acquired on or before July 4, 2025) or 10× your aggregate basis in that company's stock. Gain above the cap is still capital gain, taxed at the 28% rate for section 1202 gain.
Worked example
100,000 shares bought at $1 and sold at $200 after five years: $19.9 million of gain. The tier is 100%, and the cap is the greater of $15 million or 10× the $100,000 basis, so $15 million is excluded and $4.9 million stays taxable at 28% plus the 3.8% net investment income tax, or $1,558,200. Sell the same shares at $120 and the $11.9 million gain sits under the cap: the federal bill drops to zero.
A note on the 3-year cliff
Selling at 2 years and 11 months gives up the entire exclusion, which is why founders near the threshold usually wait. At exactly 3 years you get 50% rather than nothing, so the marginal value of the fourth and fifth year of holding is high but the jump from year 2 to year 3 is the one that matters most.
Frequently asked
What changed for QSBS in 2026?
For stock acquired after July 4, 2025, the exclusion is tiered by holding period: 50% at 3 years, 75% at 4 years, and 100% at 5 years or more. The per-issuer cap rose to $15 million (or 10× basis if greater) and the gross-assets test to $75 million. Stock acquired on or before that date keeps the old rules: 100% exclusion after more than 5 years.
How does the per-issuer limit work?
For each company, the gain you may exclude is limited to the greater of $15 million or 10 times the aggregate adjusted basis of the stock you sold. Above that ceiling the gain is still capital gain, but taxed at the section 1202 rate of 28% rather than excluded.
Is the excluded gain completely tax-free?
Free of federal income tax, yes. A 100% excluded gain is not taxable and is not an AMT preference. The 3.8% net investment income tax can still apply to the portion of gain that is not excluded, and states generally do not follow section 1202, so state tax often remains.
Sources. 26 U.S.C. 1202 as amended by Pub. L. 119-21 (OBBBA), section 70431: tiered applicable percentage, $15,000,000 per-issuer limit, $75,000,000 gross-assets test, inflation adjustments after 2026. 2026 capital-gain thresholds: IRS Rev. Proc. 2025-32. The model applies federal tax only plus the state rate you enter, and assumes a single sale year with no prior section 1202 gain from the same issuer.