Updated December 2025

QSBS Just Changed: What the 2025 Law Means for You

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) expanded QSBS benefits significantly. Higher caps, partial exclusions, and more companies qualifying. But only for stock acquired after the law passed.

If you got your shares before July 5, 2025, the old rules still apply to you.

Quick Check: Which Rules Apply to Your Stock?

The OBBBA changed QSBS rules on July 4, 2025. Your stock acquisition date determines which rules apply.

When did you acquire this stock?

For options: use exercise date. For restricted stock with 83(b): use grant date.

What Changed

Old Rules (Pre-July 2025)

•$10M exclusion cap (or 10× basis)
•5 years minimum—all or nothing
•$50M gross assets threshold

New Rules (Post-July 2025)

•$15M exclusion cap (inflation-adjusted from 2027)
•Tiered exclusions: 50% at 3yr, 75% at 4yr, 100% at 5yr
•$75M gross assets threshold (inflation-adjusted)

The New Tiered Exclusion System

The biggest change: you no longer lose everything if you sell before 5 years. For stock acquired after July 4, 2025:

Holding Period	Exclusion	Example: $10M Gain
Less than 3 years	0%	$0 excluded, ~$2.38M tax
3 to 4 years	50%	$5M excluded, ~$1.19M tax
4 to 5 years	75%	$7.5M excluded, ~$595K tax
5+ years	100%	$10M excluded, $0 tax

This is a major improvement for anyone who has to sell before 5 years. Previously, selling at 4.9 years meant zero exclusion.

Who Benefits from the New Rules

Employees joining startups after July 2025

Your options, RSUs, or stock grants will be under the new regime. Higher cap, partial exclusions available.

Investors in post-July 2025 funding rounds

SAFE conversions and equity purchases after the date get the $15M cap and tiered exclusions.

Companies between $50M and $75M in assets

Previously disqualified companies can now issue QSBS again until they hit the new $75M threshold.

People with existing stock: No change

If you acquired stock before July 5, 2025, you're still under the old rules. The new law only applies prospectively.

What Didn't Change

→Still requires a domestic C-corporation

→Still must be original issuance (no secondary purchases)

→Still requires "qualified trade or business" (consulting, finance, law still excluded)

→5 years still required for the full 100% exclusion

→State non-conformity unchanged (California still doesn't recognize QSBS)

Calculate Your QSBS Benefits

Our calculator automatically applies the correct rules based on your stock acquisition date.

QSBS Savings Calculator

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Your Stock

Stock Type

Different stock types have different holding period rules

How Acquired

Key Dates

Your holding period starts at EXERCISE, not grant. This is the #1 mistake people make.

Grant Date

Exercise Date

When you paid to convert options to shares

Expected Sale Date

When you expect to sell (exit, IPO, secondary, etc.)

Value

Cost Basis

What you paid, or the value included in your income

Expected Sale Value

Your Location

State of Residence

Your state at time of sale determines tax treatment

You Can't Game This

The law explicitly prevents swapping old stock for new stock to access the enhanced benefits:

Blocked strategies:

• Exchanging pre-July 2025 QSBS for new QSBS
• Converting old stock through corporate restructuring to get new acquisition date
• Any transaction designed to reset the acquisition date

Your acquisition date is locked in. The IRS wrote the rules this way specifically to prevent arbitrage.

Sources

Cooley LLP: The One Big Beautiful Bill Act Expands QSBS Benefits →

Mintz: QSBS Benefits Expanded Under One Big Beautiful Bill Act →

McDermott: One Big Beautiful Bill Act brings major changes to Section 1202 →