How much tax could you save selling QSBS?

Q: What is QSBS and Section 1202?

Qualified Small Business Stock (QSBS) is stock in a qualifying US C-corporation that, under Section 1202 of the tax code, can let the holder exclude federal capital-gains tax on a large portion of the gain when sold. The exclusion is capped at the greater of $10 million or 10 times the holder's basis in the stock.

Q: What are the main QSBS requirements?

Broadly: the company must be a domestic C-corporation with gross assets of $50 million or less when the stock was issued; the stock must be acquired at original issuance; the company must run an active qualifying business; and the stock generally must be held for at least five years. State conformity varies — some states, such as California, do not follow the federal exclusion.

Q: Does QSBS apply if I sell in a secondary before 5 years?

The full exclusion generally requires a 5-year holding period. Selling earlier can mean the gain doesn't qualify, though a 'Section 1045 rollover' into other QSBS may defer it in some cases. Because timing is critical, check your holding period and eligibility with a tax professional before agreeing a sale.

Qualified Small Business Stock (Section 1202) can let you exclude federal tax on up to the greater of $10M or 10× your basis in gains — often tax-free. Estimate what you could exclude when you sell.

Written & maintained by the PrivateTechShares team · Published September 2026 · Reviewed September 2026

Sale proceeds ($) — what you’d sell the shares for

Your cost basis ($) — what you paid to acquire them

Do you meet the QSBS tests? — C-corp, <$50M gross assets at issue, held 5+ years

Federal capital-gains rate on the taxable part

Federal tax you could save

$—

tax excluded on the QSBS-eligible gain

Total gain$—

QSBS-excludable gain$—

Taxable remainder$—

Federal tax on remainder$—

Estimated tax saved$—

Method and data privacy ↗

How we keep this accurate. We write from primary sources — official tax authorities (HMRC, IRS), financial regulators (FCA, SEC) and company filings — date every page, and review them regularly. This is independent, educational information, and deliberately not a substitute for professional tax, legal or financial advice on your own situation.

A rough directional estimate — not tax advice. QSBS (Section 1202) has strict tests: a domestic C-corporation, gross assets under $50M when the stock was issued, an active business, original issuance, and generally a 5-year holding period. The exclusion cap is the greater of $10M or 10× your basis. Many states (notably California) do not conform, so state tax may still apply. This tool assumes full federal exclusion when you select “yes” and ignores AMT/other adjustments. Confirm eligibility with a qualified US tax adviser before relying on it.

Why QSBS matters when you sell: if your startup shares qualify, a large chunk of your gain can be completely free of federal tax — often the single biggest lever in a sale. It’s worth checking before you agree a secondary, because timing and holding period affect eligibility.

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Questions people ask

What is QSBS and Section 1202?

Qualified Small Business Stock (QSBS) is stock in a qualifying US C-corporation that, under Section 1202 of the tax code, can let the holder exclude federal capital-gains tax on a large portion of the gain when sold. The exclusion is capped at the greater of $10 million or 10 times the holder's basis in the stock.

What are the main QSBS requirements?

Broadly: the company must be a domestic C-corporation with gross assets of $50 million or less when the stock was issued; the stock must be acquired at original issuance; the company must run an active qualifying business; and the stock generally must be held for at least five years. State conformity varies — some states, such as California, do not follow the federal exclusion.

Does QSBS apply if I sell in a secondary before 5 years?

The full exclusion generally requires a 5-year holding period. Selling earlier can mean the gain doesn't qualify, though a 'Section 1045 rollover' into other QSBS may defer it in some cases. Because timing is critical, check your holding period and eligibility with a tax professional before agreeing a sale.

General information only — not financial, tax or legal advice. Every situation is different; confirm your own numbers with a qualified adviser. PrivateTechShares is an education and tools service: it is not a broker or marketplace, does not introduce buyers and sellers, does not hold funds, and does not execute or advise on transactions. Figures use simplified assumptions and exclude many real-world factors.