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For QSBS stock issued after July 4, 2025: a 3-year holding period excludes 50% of the gain, 4 years 75%, 5 years 100%. The cap rose to $15M.
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In part one, I explained what QSBS meant and the tax bill that could let a founder sell and pay zero federal taxes on the game. Well, in 2025, Congress made it even better. And I want to talk to you what what that is. Here's what changed. The first thing, the holding period. It used to be 5 years or nothing.
So, if you sell it four years and 11 months, you get zero tax benefit. But now, it's tiered. So, hold it for 3 years, half of your gain is excluded. For four years, 75% and then for 5 years, all of it. The second thing, the cap went up. So it used to be $10 million of gain.
Now it's $15 million. And the third one, this is more very important. More companies qualify. The asset limit, the asset limit went from 50 million to 75 million. Now here's the catch. This one only applies to stock issued after July 4th to 2025. So if you got shares before then, you still are subjected to the old rule.
So let me show you how this looks like in p practice. This is hypothetical simple math to explain. So you're a founder and you got your shares in 2026. Three years later, the company sells and your gain is $10 million. Under the old rules, three years isn't five years. So, the whole 10 million is taxable.
Under the new rule, half of it, which is $5 million, is excluded from federal taxes. The other half is taxed. Now, say that you waited until year five, all 10 million could be taxfree. And if your gains were $15 million, the overrule would stop at the $10 million. Now, all 15 could qualify.
So, why does this matter? because more founders and early employees qualify. You're not losing on everything if a deal doesn't show up before year five. All that to say, know what shares you have, know when you get when you got them, and then know when your clock starts. Of course, talk to your CPA before you sell or do anything.
And if you want to walk through your equity, I would love to be able to have a conversation with you. Thank you and I pray you have a wonderful
This video is for general educational purposes only and is not personalized investment, tax, or legal advice. Every situation is different. Talk with a qualified professional about your circumstances before acting. PLC Wealth Partners is a registered investment adviser. See our disclosures.
