Jul 31 in General Tax Savings Discussion
Benefit from Qualified Small Business Stock (QSBS) Exclusion
Hey all,
For those investing in or starting small businesses, the Qualified Small Business Stock (QSBS) exclusion is an incredible tax-saving opportunity. Let’s explore how you can take advantage of this
strategy.
What is QSBS?
The QSBS exclusion allows you to exclude up to 100% of capital gains from federal taxes when you sell qualified small business stock.
Key Requirements:
- C Corporation: The stock must be from a C corporation.
- Gross Assets: The corporation’s gross assets must not exceed $50 million at the time of stock issuance.
- Holding Period: You must hold the stock for at least five years.
- Active Business: The corporation must be an active business, not a passive investment.
Benefits:
- Massive Tax Savings: Exclude up to $10 million of gains or 10 times your basis in the stock, whichever is greater.
- Encourages Investment: This exclusion incentivizes investing in small businesses, supporting economic growth.
Example:
You invest $500,000 in a C corporation. Five years later, your investment is worth $5 million. If the stock qualifies under Section 1202, you could potentially exclude the entire $4.5 million gain from federal capital gains tax.
Pro Tip:
Ensure the business meets all the QSBS criteria at the time of investment and throughout your holding period to maximize your tax savings.
Has anyone here utilized the QSBS exclusion? Share your experiences and any advice you have for others considering this strategy!
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Benefit from Qualified Small Business Stock (QSBS) Exclusion
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This group is full of future members of Benchmark IQ's 3% club! Before you get there, this is an amazing place to begin saving on your taxes.
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