Keystone CPAs- A Better Way to CPA
One of the most overlooked parts of the tax code just got a major boost.
If you own or invest in a qualified small business, Section 1202 stock may be one of the most powerful wealth-building tools you’ll ever use.
Here’s the update: under the new law, if you acquire Qualified Small Business Stock (QSBS) after the date of enactment and hold it at least four years, you can exclude 75% of the gain from federal income tax when you sell. Hold it five years or longer and that exclusion rises to 100%.
Keystone CPAs- A Better Way to CPA
One of the most overlooked parts of the tax code just got a major boost.
If you own or invest in a qualified small business, Section 1202 stock may be one of the most powerful wealth-building tools you’ll ever use.
Here’s the update: under the new law, if you acquire Qualified Small Business Stock (QSBS) after the date of enactment and hold it at least four years, you can exclude 75% of the gain from federal income tax when you sell. Hold it five years or longer and that exclusion rises to 100%.
Picture this.
You invest $1 million into a qualifying company and later sell for $5 million. Your $4 million gain could be entirely tax-free. There are very few opportunities in the tax code that are generous.
Who should be paying attention? Entrepreneurs planning a future exit. Investors backing high-growth companies. Business owners weighing the advantages of a C corporation structure. For each, these rules could reshape long-term planning.
Of course, details matter.
The company must be a C corporation. It must meet specific active business requirements. There are limits on how much gain you can exclude, and not every state follows the federal treatment. This isn’t a broad-brush strategy. It’s a precision tool, and in the right situation, it’s a game changer.
This is where proactive planning makes all the difference. It’s not just about filing a return. It’s about spotting opportunities others miss, connecting business and personal goals, and making decisions that keep more wealth in your pocket.
My team and I are here to help you think through opportunities like this. If you have questions, don’t hesitate to set up a quick call.