The passage of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, has fundamentally reshaped the landscape for business founders and investors, particularly regarding Qualified Small Business Stock (QSBS). This landmark legislation enhances the existing Section 1202 of the Internal Revenue Code, offering an unprecedented opportunity to exclude up to $15,000,000 in capital gains from federal income tax upon the sale of qualifying stock.
For entrepreneurs and early-stage investors, the new law is a powerful incentive for strategic tax planning. Our law firm is positioned to help you navigate these changes and leverage the expanded QSBS benefits to ensure maximum tax efficiency in a liquidity event.
Key Expansions Under the One Big Beautiful Bill Act
The OBBBA introduces several taxpayer-favorable changes to the QSBS regime, primarily effective for eligible stock issued after July 4, 2025:
- Increased Gain Exclusion Limit: The per-issuer capital gain exclusion limit has increased from $10,000,000 to the greater of $15,000,000 (indexed for inflation) or ten times the shareholder's basis in the stock. This change offers the potential for significant additional tax savings.
- Faster Partial Exclusions: Previously, a 100% exclusion required a five-year holding period. The new law introduces a tiered system for QSBS acquired after July 4, 2025, allowing for partial exclusions sooner:
- 50% exclusion for stock held at least three years but less than four years.
- 75% exclusion after four years but less than five years.
- 100% exclusion if the stock is held for five years or longer.
- Higher Asset Threshold: The aggregate gross asset limit for a corporation to qualify as a small business at the time of stock issuance has been raised to $75,000,000, increased from $50,000,000, thereby broadening the pool of eligible companies.
How We Can Help You Maximize This Opportunity
While the benefits of QSBS are substantial, the rules for qualification are complex and require careful planning and execution. Our legal team is well-equipped to provide critical guidance on compliance with all requirements under Section 1202 of the Internal Revenue Code. Using advanced planning strategies, such as gifting QSBS to non-grantor trusts, exclusions may be "stacked" across multiple taxpayers to maximize the total amount of gain shielded from income tax.
The changes under the OBBBA underscore the need to obtain counsel to assist with sophisticated tax planning. Do not miss out on this enhanced opportunity to protect your wealth. Contact our firm today to schedule a consultation and discuss how these new rules affect your current and future investments.