QSBS Changes Under the One Big Beautiful Bill Act: New Holding Period, Higher Exclusion Caps & $75M Asset Limit

Natalie McHugh

CPA | CK Principal

The One Big Beautiful Bill Act was signed into law on July 4^th.  The law significantly expands the Qualified Small Business Stock (QSBS) exclusion under Internal Revenue Code 1202  for stock acquired after July 4, 2025. 

Below is a concise summary of the changes:

Reduced Acquired Holding Period

Stock acquired before July 4, 2025

• Must be held at least five years to qualify for the gain exclusion.

Stock acquired on/after July 4, 2025

Tiered gain exclusion based on holding period:

• More than 3 years: 50% of capital gain exclusion; remaining gain is taxed at 28% plus 3.8% Medicare surtax. 
• More than 4 years: 75% of gain exclusion; as long as the stock remaining gain taxed at 28% plus 3.8% Medicare surtax. 
• More than 5 years: 100% gain exclusion  

Increased Exclusion Cap

Stock acquired before July 4, 2025

• Exclude the greater of $10 million ($5 million for married taxpayers filing separately) or 10 times the taxpayer’s basis in the QSBS.

Stock acquired on/after July 4, 2025

• Exclude the greater of $15 million ($7.5 million for married taxpayers filing separately) or 10 times the taxpayer’s basis in the QSBS. 
• Inflation adjustment begins in 2027.

Higher Gross Asset Limit for Issuers

Stock acquired before July 4, 2025

• QSBS benefits apply only if the issuing C Corporations had $50 million or less in gross assets at the time of stock issuance.

Stock acquired on/after July 4, 2025

• The issuer gross asset cap at the time of stock issuance increases to $75 million at time of issuance to qualify for QSBS. 

State Tax Conformity

Federal QSBS benefits don’t always apply at the state level. Cray Kaiser can provide guidance on state conformity regarding QSBS.

How Cray Kaiser Can Help

QSBS planning is time-sensitive and documentation-heavy.  There are qualifications that must be met to qualify for this gain exclusion. Have QSBS questions? Contact Cray Kaiser today. We will help you navigate through these hurdles.