{"id":14094,"date":"2021-06-28T13:45:58","date_gmt":"2021-06-28T20:45:58","guid":{"rendered":"https:\/\/canary.kcprod.info/blog\/?p=14094"},"modified":"2022-01-11T17:12:15","modified_gmt":"2022-01-12T01:12:15","slug":"how-to-take-advantage-of-the-tax-benefits-of-qsbs","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/how-to-take-advantage-of-the-tax-benefits-of-qsbs\/","title":{"rendered":"How To Take Advantage of the Tax Benefits of QSBS"},"content":{"rendered":"\n

If you work at a company that\u2019s recently gone public, you might be tempted to take up angel investing<\/a>. And if you\u2019re going to do that, it\u2019s important to be familiar with the tax treatment of certain investments known as qualified small business stock<\/a>, or QSBS. If you own QSBS, you can exclude up to $10 million of capital gains from your federal tax liability.<\/strong> <\/p>\n\n\n\n

This is very attractive on its own, but many people don\u2019t realize that paying zero federal tax on $10 million could be just the beginning. We\u2019ll use a baseball analogy to demonstrate exactly how this works. If saving federal tax on $10 million is like hitting a single in baseball, what can you do with a double, a triple, or even a home run? Read on to learn more about how to take advantage of this powerful tax benefit. <\/p>\n\n\n\n

What is QSBS?<\/h2>\n\n\n\n

Let\u2019s start with the basics. Introduced in 1993 as Section 1202 of the Internal Revenue Code (IRC), QSBS permits a partial exclusion on qualifying gains. The law evolved over time, but it became more exciting in September 2010 when changes were made that eliminated the federal tax on qualifying sales.<\/p>\n\n\n\n

QSBS has been a great opportunity for years, and people are becoming more aware of it. And while this tax-free benefit is currently available, it could potentially change if federal and state tax rates rise, or if changes are made to tax law. Many people never look beyond the basic federal benefits for QSBS and miss out on the potential estate and gift and state savings opportunities.<\/p>\n\n\n\n

How to qualify for QSBS<\/h2>\n\n\n\n

Here are five general requirements (among many) to consider when determining whether you can qualify for QSBS tax benefits: <\/p>\n\n\n\n

1. In order to qualify for 100% exclusion, the stock must have been purchased from a domestic C corporation<\/a> at original issuance after September 27, 2010. (Shares you bought from another investor don\u2019t qualify.)<\/p>\n\n\n\n

There are two other levels of potential gain exclusion:<\/p>\n\n\n\n