The formulas
- Excluded = exclusion % x lesser of eligible gain and the per-issuer cap
- Per-issuer cap = greater of (dollar limit - prior eligible gain from the issuer) and 10 x aggregate adjusted basis
- Dollar limit: $15,000,000 (stock acquired after July 4, 2025) or $10,000,000 (earlier); halved if married filing separately
- Exclusion %: 50% (3 years), 75% (4 years), 100% (5 years) for stock acquired after July 4, 2025
How it works
Section 1202 excludes part or all of the gain on qualified small business stock held long enough. For stock acquired after July 4, 2025 the exclusion is 50 percent after 3 years, 75 percent after 4 years and 100 percent after 5 years. Stock acquired after September 27, 2010 and on or before July 4, 2025 gets a 100 percent exclusion if held more than 5 years.
The gain eligible for each issuer is capped at the greater of the dollar limit or 10 times your basis. The issuer must have had gross assets of no more than $75,000,000 ($50,000,000 for older stock). The other qualification tests are not checked here. The $15,000,000 limit is indexed after 2026.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
What if the stock was acquired earlier?
Other acquisition windows have 50 percent and 75 percent exclusions. Only the windows listed above are modeled.
Does the cap reset every year?
No. It is per issuer and is reduced by eligible gain used in earlier years.
When are gross assets measured?
Section 1202(d) tests them before the stock is issued and immediately after, using cash plus the adjusted basis of other property.
Sources
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.