Articles & Alerts
Unlocking Opportunity: What You Need to Know About QSBS Changes Under the One Big Beautiful Bill Act
Written by: Marlen Preyger, Director
As tax legislation continues to evolve, opportunities for entrepreneurs, investors, and small businesses often emerge — but only for those paying close attention. One such opportunity revolves around Qualified Small Business Stock (QSBS), a powerful tax tool designed to spur investment in startups and small businesses, which allows eligible taxpayers to exclude up to 100% of taxable capital gains on the sale of qualifying stock.
With the passage of the “One Big Beautiful Bill Act” (OBBBA) on July 4, 2025, significant changes to QSBS will reshape how shareholders plan for future gains and exits. Under the OBBBA, new revisions expand the benefit of QSBS, providing taxpayers with additional opportunities to utilize, and perhaps increase, the exclusion of capital gains.
Anchin previously published an alert on QSBS outlining the basics and related tax benefits. This update focuses on the changes introduced under the recent legislation.
As a reminder, before the passage of the new legislation, to qualify for the QSBS exclusion the following basic qualifications had to be met:
- Stock must be originally issued by a domestic C-corporation. The stock may not be acquired through the secondary market.
- Gross assets must not exceed a value of $50,000,000 at any time immediately before or after the issuance of the stock.
- At least 80% of the business’ assets must be used in the conduct of a qualifying business.
- There cannot be significant redemptions of stock by the issuing corporation.
- The shareholder must have held the stock for more than 5 years at the time of sale.
- QSBS exclusion is only available to shareholders that are not corporations.
The below chart highlights the key changes that have been passed as part of the OBBBA. It is important to note that the changes enacted by the recent legislation are effective for stock issuances after July 4, 2025 (the “Effective Date”). For stock issued before the Effective Date, the pre-OBBBA rules are still in effect, as outlined below.
| Prior Law (Stock Issued before Effective Date) | After OBBB (Stock Issued after Effective Date) | |
|---|---|---|
| Per-Issuer Gain Exclusion Cap | Capital Gain Exclusion is limited to the greater of 10X amount invested or $10M | Capital Gain Exclusion is limited to the greater of 10X amount invested or $15M, to be indexed for inflation beginning in 2027 |
| Holding Period and Applicable Gain Exclusion [1] |
Minimum 5-year holding period for gain exclusion 50% Gain Exclusion for Stock Acquired between August 10, 1993 – February 16, 2009 75% Gain Exclusion for Stock Acquired between February 17, 2003 – September 25, 2010 100% Gain Exclusion for Stock Acquired between September 26, 2010 |
For Stock issued before the Effective Date, the pre-OBBB rules apply.
For Stock Acquired after July 4, 2025 – 50% Gain Exclusion for 3 year holding period 75% Gain Exclusion for 4 year holding period 100% Gain Exclusion for at least 5 year holding period |
| $50 Million Gross Assets Test | Corporation cannot exceed $50M in gross assets at time of stock issuance before July 5, 2025 | Cannot exceed $75M in gross assets at time of stock issuance after July 4, 2025, to be indexed for inflation beginning in 2027 |
The above changes have strategic implications for both founders, investors, and small businesses promoting greater flexibility in exits, increased investment in startups, and overall cash savings. While navigating QSBS is complex, it is important for maximizing tax advantages, especially with the new expanded rules.
For more information on the Qualified Small Business Stock (QSBS) exclusion and planning opportunities, speak with your Anchin Relationship Partner.
[1] Note that the taxable portion of the Section 1202 gain (non-excluded gain) continues to be taxed at a capital gain rate of 28% plus an additional 3.8% for the net investment income tax. This has remained unchanged between the old and new tax law.
