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QSBS calculator

QSBS is Section 1202 of the tax code: hold stock in a qualifying startup long enough and millions of dollars of gain come out federally tax-free, which for an angel or an employee holding exercised options is usually the largest tax break they'll ever claim. It was rewritten in July 2025, and the version that applies to your stock depends entirely on the day you bought it. Two rulebooks now run side by side. This routes your position to the right one, then tells you what your gain is worth today — and what it's worth if you wait.

Updated for the One Big Beautiful Bill Act Federal and state, all 50 states Nothing stored, nothing sent

Acquisition date

The day you got stock, which is often not the day you think. A SAFE or note: the date it converted. Options: the date you exercised, not granted or vested. RSUs: settlement.

Expected sale date

Cost basis

What you paid — for exercised options, the strike plus any spread you already paid income tax on. Shorthand works: 100k, 1.5M.

Expected sale price

Company gross assets at issuance Optional

Total assets on the company's books when your shares were issued — for options, the day you exercised. Over the ceiling and the stock never qualified at all.

Where you'll pay state tax

Doesn't conform — taxes the gain you exclude federally.

Assumptions

Filing status

Only married-filing-separately changes the math: it halves the per-issuer cap.

Apply the 3.8% net investment income tax

On by default. The NIIT applies to most investors at these gain levels, and never to gain that's excluded.

New rules · post-July 4, 2025 Held about 4 years

Example scenario — put your own numbers in

75% excluded federally $2,175,000 of your gain is free of federal tax

California doesn't follow along. It taxes all $2,900,000 regardless, so your real bill is $616,250, not $230,550.

Holding period

0% February 1, 2026

50% February 1, 2029

75% February 1, 2030

100%

Sale

Acquired February 1, 2026 Selling March 1, 2030

Gain on sale

$2,900,000

Excluded federally

$2,175,000

Federally taxable

$725,000

at the 28% rate

Federal tax

$230,550

California tax

$385,700

13.3% on the full gain

Total tax

$616,250

21.25% of the gain

With no Section 1202 at all you'd owe $1,075,900, so QSBS is worth $459,650 to you here — all of it federal.

Wait until February 1, 2031

That's 11 months longer, and it takes the exclusion from 75% to 100%.

$230,550 less tax

California doesn't conform to Section 1202. The federal exclusion buys you nothing at the state level: $2,900,000 is taxable there at 13.3%, which is $385,700, whether you hold three years or thirty. California decoupled from Section 1202 in 2013 and has never come back. Every dollar the federal government exempts is fully taxable here — for most angels this is the single largest number missing from a QSBS estimate.

This assumes the rest of Section 1202 is satisfied: a domestic C corporation, stock acquired at original issuance, an active qualifying business, and no disqualifying redemptions. Both tax figures use top marginal rates with no brackets, deductions, credits, or local income tax — an estimate for planning, not a return.

Your whole portfolio

You have more than one position

Signed tracks acquisition dates across every check you've written and tells you which positions cross the 3-, 4-, and 5-year lines, and when — before you sell at four years and eleven months.

Track this automatically

The 2025 rewrite

Two versions of Section 1202 are now live at once

For thirty years QSBS was a single cliff: hold five years and the gain was tax-free, sell at four years and eleven months and it was fully taxable. The One Big Beautiful Bill Act, signed July 4, 2025, replaced that cliff with a staircase — but only for stock acquired after that date.

Everything you already owned on July 4, 2025 stays on the old rules for the rest of its life, even if you sell it in 2035. Which means an angel with a portfolio spanning that date is running both regimes simultaneously, with different holding periods, different caps, and different asset ceilings on different lines of the same spreadsheet.

The two figures marked "indexed" begin annual inflation adjustments in 2027. This calculator uses the statutory floor rather than guessing at future adjustments.

	Acquired on or before July 4, 2025	Acquired after July 4, 2025
Exclusion	100% at 5 years. Nothing before it.	50% at 3 years 75% at 4 years 100% at 5 years
Per-issuer cap	Greater of $10M or 10× basis	Greater of $15M or 10× basis (indexed)
Gross assets ceiling	$50M at issuance	$75M at issuance (indexed)
AMT preference	7% of excluded gain on the pre-2010 partial tiers	None
Rate on gain you don't exclude	28% + 3.8% NIIT	28% + 3.8% NIIT

The partial tiers are worth less than they sound. Holding three years does make the gain long-term — but long-term capital gains don't all share one rate, and the slice that qualifies for §1202 without being excluded sits in the 28% band rather than the 20% one. On a $1M gain at the 50% tier, that means sheltering $500,000 and then paying more on the rest than if the stock had never been QSBS at all: $159,000 of federal tax, against $238,000 with no exclusion. A third off the bill, not half. The 28% is a ceiling rather than a surcharge — under the top bracket you'd pay your ordinary rate instead, and this calculator assumes the top — so read the dollars, not the percentage: the result above prices the same sale with no Section 1202 beside it, and the gap between them is what the exclusion is actually worth.

If your equity came from a job

Section 1202 doesn't care that you're an employee. It cares when you got stock.

The statute never mentions employment. It's a test on the shares — issued by a domestic C corporation, acquired at original issuance, held long enough — and an employee who exercises options and holds clears exactly the same bar an investor does. The per-issuer cap is per taxpayer, so you get your own $10M or $15M rather than a slice of one ceiling shared across the cap table.

What goes wrong is the gap between an option and a share. An option isn't stock, so a grant date, a vesting schedule, and four years of tenure start nothing. The clock starts the day the company issues you shares, which for an option is the day you exercise and pay for them.

That makes the most common employee outcome the worst one: vest for years, exercise the week the acquisition closes, and hold qualifying stock for nine days.

What you hold	What starts the clock	Where that usually lands
Restricted stock, 83(b) filed	The day you bought it	Best case — founders and the first few hires
Options exercised early, 83(b) filed	Exercise date	Clock runs while you work. Usually qualifies
Options exercised at the exit	Exercise date	Days of holding. No exclusion
Restricted stock, no 83(b)	Each vesting date	A separate clock per tranche
RSUs	Settlement, not grant	Usually at or after IPO, past the asset ceiling too
Shares bought from a colleague	Nothing — not an original issuance	Not QSBS at any holding period

Exercising late can disqualify the shares outright, not just shorten the hold. The gross assets ceiling is tested when stock is issued, which for an option is the exercise date. Join at $8M of assets, exercise after the company has crossed $50M — $75M for shares issued after July 4, 2025 — and the stock may never have been QSBS at all. Five more years of holding doesn't repair it. Put your exercise date in the acquisition field above and the company's assets on that date in the gross assets field.

Your basis is probably higher than the strike price. Exercising an NSO makes the spread ordinary income that year, so your basis is the full fair market value on the exercise date, not what you wrote the check for. An ISO you hold through a qualifying disposition keeps a basis of just the strike. Basis does double duty here — it sets the gain, and it sets the 10× floor under the per-issuer cap.

Where you live

5 states ignore the exclusion. A sixth halves it.

Most states start their income tax from your federal number, so gain Section 1202 removes never reaches them and the state follows the exclusion for free. A handful don't, and in those the federal exclusion is worth exactly nothing at the state level — no matter how long you hold.

California is the one that matters most to angels, and it's not close. It decoupled in 2013 and taxes the full gain at up to 13.3%. On a $3M gain that's about $399,000 that waiting for the five-year mark does nothing to reduce.

This list is also the part of QSBS moving fastest right now. Oregon decoupled effective January 1, 2026. New Jersey conformed on the same date, going the other way. DC decoupled by emergency act and Congress disapproved it. A New York decoupling bill was introduced and withdrawn. Anything you read from last year is probably wrong.

Doesn't follow Section 1202	Top rate on the gain	What it costs on $3M
Alabama	5%	$150,000
California	13.3%	$399,000
Mississippi	4%	$120,000
Oregon	9.9%	$297,000
Pennsylvania	3.07%	$92,100
Hawaii (partial)	7.25%	Conforms only to the old 50% exclusion

Two states flipped on the same day. Oregon left conformity and New Jersey joined it, both effective January 1, 2026 — so for those two, the answer depends on which side of New Year's Day your sale closes. The calculator handles that; most write-ups don't.

Under the hood

How the number is built

Route by acquisition date

Everything downstream — the tiers, the cap, the asset ceiling, the AMT treatment — is decided by whether you bought before or after July 4, 2025. Nothing about the sale date changes which regime applies.

Cap the eligible gain

Section 1202(b) limits gain from one company to the greater of the dollar cap or 10× your basis. Gain above the cap drops out of Section 1202 entirely and is taxed as an ordinary long-term capital gain.

Apply the tier percentage

The holding period on the sale date picks the percentage. What the percentage leaves behind is "Section 1202 gain" under Section 1(h) — the slice taxed at 28% rather than 20%.

Price the wait

Then it re-runs the whole thing at every tier date still ahead of you, holding the sale price constant, so the cost of selling early shows up as a dollar figure instead of a rule.

Limits

What this deliberately doesn't do

A calculator that pretends to settle your tax position would be worse than no calculator. This one answers a narrow question well and tells you where the edges are.

State brackets, deductions, credits, and local income tax. The state figure uses one top-marginal rate against the whole gain. It doesn't know about New York City's extra ~3.9%, Washington's standard deduction, or the year you happened to move. The rate box next to the state select exists so you can put your own number in.

The qualification tests you can't see from a date and a dollar figure. Domestic C corporation status, original issuance, the 80% active business requirement, the excluded industries (professional services, banking, farming, hospitality), and the redemption rules that can silently void eligibility for every shareholder.

Stacking and packing. Gifting shares to family members or non-grantor trusts multiplies the per-issuer cap, and contributing appreciated assets can raise the 10× basis figure. Both are real planning moves and both need a lawyer, not a form field.

Your other income. Capital gains brackets, AMT exposure, state residency changes, and carryforward losses all move the real number. This assumes the top long-term rate throughout.

The tax you already paid to get the stock. Exercising an NSO is ordinary income in that year, and exercising an ISO can trigger AMT in that year — both real bills, both outside this calculator. Section 1202 only touches the gain between your basis and the sale price, so an exercise that cost you money up front still shows up here as nothing but a higher basis.

This is not tax advice. It's an estimate built from the statute as written, for planning conversations. Before you act on a QSBS number — especially a partial-tier one, where Treasury guidance is still outstanding — take it to a CPA.

Questions

The things people ask first

What changed about QSBS in 2025?

The One Big Beautiful Bill Act rewrote Section 1202 for stock acquired after July 4, 2025. Those shares get a tiered exclusion — 50% at three years, 75% at four, 100% at five — instead of all-or-nothing at five years. The per-issuer cap rose from $10 million to $15 million, the company's gross assets ceiling rose from $50 million to $75 million, and the AMT preference on partial exclusions was struck. Stock acquired on or before July 4, 2025 keeps the old rules in full.

Which set of rules applies to my stock?

The acquisition date decides it, not the sale date. Stock acquired after July 4, 2025 is on the new tiered regime for its whole life. Stock acquired on or before that date stays on the old regime even if you sell it in 2035. An investor holding both is running two rulebooks at once.

Do I still have to hold for five years?

For 100% of the gain, yes. What changed is that a shorter hold is no longer worth nothing: post-OBBBA stock sold at three years excludes half the gain, and at four years three quarters. Pre-OBBBA stock sold at four years and eleven months still excludes nothing.

Why is the tax rate 28% and not 20%? Isn't the gain long-term?

It is long-term — three years clears the one-year test easily. But long-term capital gain isn't taxed at a single rate. Section 1(h) sorts it into bands, and gain that qualifies as QSBS without being excluded is "Section 1202 gain," which lands in the 28% band rather than the 20% one. With the 3.8% net investment income tax on top, the non-excluded half of a three-year sale is taxed at roughly 31.8%. It's the reason a 50% exclusion saves less than half your tax bill. The 28% is a ceiling and not a surcharge, so a seller below the top bracket pays their ordinary rate instead.

When does the holding period clock start on a SAFE?

A SAFE or convertible note isn't stock, so the Section 1202 clock generally doesn't start until it converts into qualifying stock at the priced round. Investors regularly measure from the wire date and come up years short. Use the conversion date here.

I'm an early employee — does QSBS apply to me too?

Yes. Section 1202 tests the stock, not your job title, and the statute never mentions employment. An employee who exercises options and holds the resulting shares clears the same bar an angel does, on the same tiers. The per-issuer cap is per taxpayer, so you get your own $10 million or $15 million — it isn't a slice of one ceiling shared across the cap table. What catches employees isn't eligibility, it's the date the clock starts.

When does the holding period start on stock options?

The day you exercise. Not the grant date, not the vesting date, and not your start date. Option shares are issued to you when you pay for them, so someone who joined at seed, vested over four years, and exercised the week the acquisition closed has held QSBS for days. Early exercise with an 83(b) election starts the clock immediately, which is most of the reason it's worth doing.

Can exercising too late disqualify my shares entirely?

It can, and this one is quieter than the holding period. The company's gross assets are tested when the stock is issued — which for options means the day you exercise, not the day you were granted them. Join when the company has $8 million on the books, exercise after it has crossed $50 million (or $75 million for shares issued after July 4, 2025), and the stock may never have been QSBS at all. Holding it for five years afterward doesn't fix that. It's an argument for exercising early that has nothing to do with the strike price.

Do RSUs ever qualify for QSBS?

Rarely. An RSU isn't stock until it settles, so both the holding period and the gross assets test land on the settlement date. At most companies that's at or after an IPO — long past the asset ceiling, and five years from a liquidity event you've already had. RSUs can qualify in principle, but in practice QSBS is an options question, which is why it mostly matters at companies still small enough to be issuing them.

What's my cost basis if I exercised options?

What you paid, plus any spread you've already paid ordinary income tax on. Exercise an NSO and the spread is W-2 income that year, so your basis is the full fair market value on the exercise date. Exercise an ISO and hold it through a qualifying disposition and your basis is just the strike — the spread is an AMT item, not regular-tax basis. Basis does double duty in Section 1202: it sets the gain, and it sets the 10× floor under the per-issuer cap.

I bought shares in a tender offer. Is that QSBS?

No. Section 1202 requires original issuance — the shares have to come from the company itself. Buying a colleague's stock in a tender or on a secondary market makes you a secondary purchaser, and the exclusion doesn't travel with the shares no matter how long you then hold them. Selling into a tender is the opposite case: that's a sale, and if your own shares qualified it's exactly what this calculator prices. Note that a company buying back its own stock near the time other shares are issued can void QSBS for those shareholders under the redemption rules, which is worth raising with a CPA.

Which states tax QSBS gain anyway?

As of August 2026: California, Pennsylvania, Alabama, Mississippi, and — new this year — Oregon, which decoupled entirely for sales on or after January 1, 2026 under SB 1507. Hawaii conforms only to the old 50% exclusion. Everyone else follows the federal number, because conforming states start from federal income and gain the exclusion removes never arrives. New Jersey went the other way and conformed on January 1, 2026, and DC decoupled by emergency act before Congress disapproved it. This is the most volatile part of QSBS right now.

Why does California cost so much more?

California decoupled from Section 1202 in 2013 and never came back, so it taxes the entire gain at up to 13.3% no matter how long you held. On a $3 million gain that's roughly $399,000 the federal exclusion does nothing about. For most California angels it's the largest number missing from a QSBS estimate, and it doesn't shrink by waiting.

What if I'm not a US taxpayer?

Section 1202 almost certainly isn't your rule. The exclusion is written for US taxpayers, and a non-resident alien generally isn't subject to US tax on gain from selling stock at all — unless the gain is effectively connected to a US trade or business, or you were in the US 183 days or more in the year of sale. There's usually no US tax for the exclusion to remove. Your home country's rules, and any treaty with the US, are what govern. US citizens and green card holders abroad are still US taxpayers and Section 1202 applies to them normally.

What if I have to sell before I qualify?

A Section 1045 rollover can carry the holding period forward. If you've held QSBS more than six months, you can roll the proceeds into newly issued QSBS within 60 days of the sale and the original holding period comes with it. It's a hard deadline, and missing it is expensive.

Keep reading

QSBS, defined Section 1045 rollovers Cost basis Gain and loss The full glossary All tools