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🇺🇸 US · US taxQualified small business stock (QSBS)
Also called: QSBS, Section 1202
In one line
US shares that, if they meet strict conditions and are held long enough, can let you exclude a large chunk of the gain from federal tax.
In plain English
Under Section 1202, stock in a qualifying small C-corp held for the required period can escape federal capital-gains tax on much or all of the gain, up to generous limits. It's one of the biggest tax breaks in US startup equity.
If you were explaining it to a 5-year-old
If you keep a special toy from a small shop long enough, the taxman says: 'you can keep most of your profit, tax-free.'
Why it matters when you sell
QSBS can dramatically change your after-tax proceeds, so whether your shares qualify — and how long you've held them — can be worth more than the sale price you negotiate.
Related terms
Put it to use
When you're ready to go deeper, there's an optional Equity Toolkit and Report.
Sources
Primary references for this term: IRS (US tax). Our definitions are written in plain English and kept evergreen — see the glossary methodology. General information, not advice.
Educational information only — not financial, tax or legal advice, and not an offer to buy or sell any security. Definitions are general; your own documents and local law govern your situation. PrivateTechShares is independent and not a broker or marketplace.