QSBS Exclusion Calculator 2026

Qualification and issue-date scope. This is a single-issuer, single-lot illustration for a noncorporate individual acquiring stock directly at original issue from a domestic C corporation. IRC §1202(c)(1)–(2), (d)(1) and (e) require qualifying original issue, aggregate gross assets at all times before and immediately after issuance within the applicable limit, and at least 80% active-business assets during substantially all of the holding period. The limits are $50 million for stock issued on or before July 4, 2025 and $75 million for stock issued after that date under P.L. 119-21 §70431(c). Enter the highest relevant gross assets, including issuance proceeds. The acquisition-date rule in §1202(a)(6) and the issuance-date asset rule coincide in this original-issue scope. Section 1202(e)(3)(A)–(E) excludes health, law, accounting/actuarial, architecture/engineering, performing arts, consulting, athletics, financial services/brokerage, businesses whose principal asset is employee reputation or skill, banking/insurance/financing/leasing, farming, specified mining/extraction businesses, and hotels/motels/restaurants.

Two redemption tests, one attestation. Reg. §1.1202-2(a) covers purchases from the taxpayer or related persons during the “4-year period beginning on the date 2 years before the issuance.” Its de minimis amount is exceeded only when aggregate payment exceeds $10,000 and more than 2% of their stock is acquired. Paragraph (b) covers significant redemptions in the “2-year period beginning on the date 1 year before the issuance”: purchased stock value must exceed 5% of the corporation's stock value at the beginning of that period, with its additional de minimis tests of more than $10,000 and more than 2% of outstanding stock. Paragraphs (c)–(d) supply disregarded transactions and exceptions, including qualifying service-termination, death, disability/mental-incompetency and divorce purchases. The toggle attests whether either test disqualifies the stock after these rules; this calculator does not reconstruct redemption transactions.

Holding periods and tiers. P.L. 119-21 §70431(a) amended §1202(a)(1)(A) to retain “held for more than 5 years” for old-era stock and §1202(a)(1)(B) to use “held for at least 3 years” for new-era stock. Section 1202(a)(5) specifies 3 years / 50%, 4 years / 75%, and 5 years or more / 100%. Within this tool's post-2012 acquisition scope, old-era stock receives 100% only when the sale date is strictly after its fifth anniversary; new-era tiers use the third, fourth and fifth anniversaries inclusively. Stock held one year or less produces short-term gain taxed at ordinary rates in both comparisons. A failed qualification gate or insufficient holding period yields no exclusion and no §1202 28%-rate category.

Per-issuer cap and prior eligible gain. Section 1202(b)(1) caps eligible gain at the greater of the applicable dollar headroom or 10× original-issue adjusted basis for the single lot. The base dollar limit is $10 million for old-era stock and $15 million for new-era stock; §1202(b)(3) halves those dollar amounts for MFS to $5 million / $7.5 million, without halving the 10× basis alternative. Section 1202(b)(4) reduces the dollar limit by “the aggregate amount of eligible gain taken into account … under subsection (a)” for prior years, including stock acquired “before, on, or after” the applicable date. This means eligible gain after the then-applicable cap but before the percentage. Dollar headroom is floored at zero. The final sentence of §1202(b)(1) determines basis “without regard to any addition to basis after the date on which such stock was originally issued.” This model assumes no later basis additions for its gain computation. Gain = max(0, proceeds − basis); eligible amount = min(gain, cap); exclusion = eligible amount × qualifying percentage. Post-2026 indexed limits are not preset; future-date illustrations retain 2026 parameters.

Income-tax allocation, not a flat tax on the entire remainder. IRC §1(h)(4)(A)(ii) and (7) classify the eligible amount left taxable solely because of the exclusion percentage as section 1202 gain. Under §1(h)(1)(A)(ii), the ordinary-rate portion includes the lesser of “the amount of taxable income taxed at a rate below 25 percent” and “taxable income reduced by the adjusted net capital gain.” Following the Schedule D Tax Worksheet allocation (lines 14, 19–21, 43–47), let T be other ordinary taxable income, R the regular long-term gain, Q the taxable §1202 remainder and B the top of the 24% bracket. Ordinary base X = max(T, min(T + Q, B)); Q first fills X − T at ordinary rates. Only Q − (X − T) is taxed at flat 28%. Regular LTCG is allocated to the 0% / 15% / 20% bands above X, capped by R. The final income tax is the smaller of this layered tax and ordinary tax on T + R + Q. The 28%-rate category never receives a 0% / 15% / 20% capital-gains rate. The current published worksheet structure is used with the published 2026 thresholds, not a claim that a future-year form has been released.

Published 2026 parameters. Rev. Proc. 2025-32 §4.01, Tables 1–4, and §4.03 supply ordinary and long-term capital-gains brackets. Ordinary rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%. The top of the 24% bracket is $201,775 Single/MFS, $403,550 MFJ and $201,750 HoH. LTCG 0% / 15% ceilings are $49,450 / $545,500 Single; $98,900 / $613,700 MFJ; $49,450 / $306,850 MFS; and $66,200 / $579,600 HoH. Section 4.14's standard deductions are not subtracted again: the entered taxable income is already after deductions. This reuses the site's existing 2026 bracket tables.

NIIT and comparison scope. IRC §1411(a)–(c) imposes 3.8% on the smaller of net investment income and MAGI above $200,000 Single/HoH, $250,000 MFJ or $125,000 MFS. These thresholds are not indexed. The IRS NIIT Q&A states: “The Net Investment Income Tax does not apply to any amount of gain that is excluded from gross income for regular income tax purposes.” Here, NII is this sale's entire non-excluded gain, including both regular and §1202-rate gain; MAGI = other MAGI + that taxable gain. Sale-only NIIT = 3.8% × min(taxable gain, max(0, MAGI − threshold)). The no-benefit comparison treats the entire gain as regular LTCG, or ordinary gain if short-term, and adds the corresponding sale-only NIIT. Both columns include tax on the same other income. Difference = tax without §1202 − tax with §1202; signed results remain visible.

Input contract and exclusions. Money fields accept plain numbers or correctly grouped thousands commas, normalize negative entries to $0, cap at $999,999,999, and round half-up to whole dollars ($0.50 rounds up). Each field commits one complete value when you leave it or press Enter. Empty or malformed drafts, including 1,23, remain visible as invalid and retain the last valid value; no substring or tail group is parsed. Outputs retain cents. Reset restores the complete C01 example. Date errors and stock issued before January 1, 2013 suppress the estimate. Future sale dates are hypothetical; this tool does not invent 2027+ indexed amounts. State tax (including CA/NJ nonconformity), AMT, §1045 rollovers, gift/inheritance holding-period tacking, pass-through entities, multiple lots/sales and basis aggregation, post-issuance basis additions, pre-2013 stock, corporate taxpayers, other investment income/losses and full-return interactions are outside scope. Illustrative only. ESTIMATED · NOT ADVICE / ILLUSTRATION - NOT OFFICIAL.