Qualified Small Business Stock Exclusion Optimizer

Project how much of a Qualified Small Business Stock exit qualifies for the Section 1202 exclusion. Enter the adjusted basis, expected sale proceeds, any lifetime QSBS gain already claimed, and the tax rate you want to test to reveal recognized gain, the exclusion applied, federal tax avoided, and the lifetime cap headroom that remains for future sales.

Adjusted QSBS basis after conversions, option exercises, or AMT adjustments; cannot be negative.
Projected gross proceeds from the QSBS disposition before transaction fees or taxes.
Optional — defaults to $0.00. Enter the cumulative QSBS gain already excluded to date.
Optional — defaults to 20.00%. Combine the federal long-term capital gains rate with NIIT or surtaxes if applicable.
Optional — defaults to 10× basis. Switch to 5× if you rely on the alternative basis test or a lower cap.

Illustrative planning tool only. Confirm Section 1202 eligibility, holding periods, and reporting mechanics with a qualified tax professional before filing.

Examples

  • Scenario 1 – Married founder sells QSBS after 7 years: $100,000.00 basis, $6,000,000.00 proceeds, no prior exclusion, 20.00% rate ⇒ Recognized gain: $5,900,000.00 with 100.00% eligible for exclusion. Excludable gain: $5,900,000.00; taxable remainder: $0.00. Estimated federal tax saved at 20.00%: $1,180,000.00. Lifetime cap applied to this sale: $5,900,000.00 with $4,100,000.00 remaining (59.00% of the $10,000,000.00 lifetime limit used to date).
  • Scenario 2 – Founder with prior QSBS usage sells a second tranche: $1,200,000.00 basis, $14,000,000.00 proceeds, $3,000,000.00 prior exclusion, 23.80% rate ⇒ Recognized gain: $12,800,000.00 with 70.31% eligible for exclusion. Excludable gain: $9,000,000.00; taxable remainder: $3,800,000.00. Estimated federal tax saved at 23.80%: $2,142,000.00. Lifetime cap applied to this sale: $9,000,000.00 with $0.00 remaining (100.00% of the $12,000,000.00 lifetime limit used to date).

FAQ

What Section 1202 multiplier should I use?

Most founders qualify for the 10× basis multiplier, but corporations that raised substantial capital before QSBS eligibility may only meet the 5× alternative basis test. Adjust the multiplier to reflect your facts before comparing to the $10 million default cap, or raise it if a larger contractual cap applies.

What happens if I already used the entire lifetime cap?

Enter the cumulative QSBS exclusion you have already claimed. When prior claims exceed the lifetime cap, the calculator flags that no additional gain can be excluded, reports the excess as taxable, and highlights how far beyond the cap you already are.

Does the tool confirm the five-year holding period or active business tests?

No. It assumes the stock meets every Section 1202 requirement, including the five-year holding period, $50 million gross assets test, and active business rules. Verify eligibility with your tax advisor before relying on the exclusion.

How should I choose the capital gains rate?

Use the federal long-term capital gains rate you expect to face, including the 3.8% net investment income tax if applicable. State taxes are not included, so add them separately if you need a full after-tax projection or run a second scenario for state exposure.

Can I model installment sales or partial share dispositions?

Yes. Run separate calculations for each installment payment or partial block sold. Enter the proportional basis allocated to that tranche along with any prior exclusion already claimed to keep lifetime cap tracking accurate.

Additional Information

  • Recognized gain equals expected sale proceeds minus QSBS basis, floored at zero.
  • The lifetime exclusion compares $10 million with basis multiplied by the Section 1202 multiplier and uses the larger value.
  • Prior QSBS exclusions reduce the remaining lifetime cap before the current sale is evaluated.
  • Federal tax savings apply only the provided capital gains rate; state conformity, AMT, and partial exclusion percentages are excluded.
  • Cap usage is capped at 100% to show whether any headroom remains for future QSBS exits.
  • Outputs assume a 100% Section 1202 exclusion; adjust the tax rate input if a partial exclusion percentage (50% or 75%) applies to your shares.

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