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Updated July 28, 2026. Quick answer: Which cap and which holding schedule apply depends on when your stock was issued, not when you sell. Stock issued after 4 July 2025 gets a $15,000,000 cap and a tiered 50/75/100% exclusion at 3/4/5 years; earlier stock keeps the $10,000,000 cap and is all-or-nothing at five years.
Form 8949 for 2025, read code by code: Form 8949 code Q and Form 8949 code R.
More IRS forms and schedules, read line by line: Form 8997 instructions.
Section 1202 can exclude a very large capital gain entirely — but which cap and which holding-period schedule apply depends on when your stock was issued, not when you sell.
There are now two QSBS regimes running side by side
This is the single most important thing to establish before any other question, and most current coverage skips it. The One Big Beautiful Bill Act changed Section 1202 effective 4 July 2025 — but only for stock issued after that date. Stock issued on or before it stays on the pre-existing rules permanently.
| Issued on/before 4 Jul 2025 | Issued after | |
|---|---|---|
| Per-issuer cap | $10,000,000 or 10× basis | $15,000,000 (indexed from 2027) or 10× basis |
| Gross assets test at issuance | $50,000,000 | $75,000,000 (indexed from 2027) |
| 3 years held | No exclusion | 50% |
| 4 years held | No exclusion | 75% |
| 5+ years held | 100% | 100% |
Most people holding QSBS today are on the old rules, because their stock was issued before July 2025. Anything written before then describes the old regime as current; much written since describes the new one as universal. Both are wrong for half the audience — check your issuance date first.
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How our partner relationships workThe 10× basis alternative is unchanged and often larger
The cap is the greater of the dollar figure or ten times your aggregate adjusted basis in the stock (IRC §1202(b)(1)). For a founder with nominal basis the dollar cap governs. For someone who paid real money — an investor, or an employee who exercised early at a meaningful price — the 10× figure can be far larger and is the one that binds.
What this cannot check
Qualification is a set of tests about the issuing company and the manner of issuance: C corporation status, the active-business requirement, the gross-assets ceiling measured at issuance, original issuance directly to you, and redemption rules that can taint an entire block. A gain that clears the arithmetic here can still fail the statute. This computes the ceiling of the benefit, not your entitlement to it.
Figures verified against IRC section 1202 (including the Pub. L. 119-21 amendments) as posted at law.cornell.edu and uscode.house.gov, and the 28% rate for unexcluded section 1202 gain in IRC section 1(h), on September 30, 2026; the third-party professional analyses cited below were not re-checked.
Sources
IRC §1202(a)(5) (tiered exclusion); IRC §1202(b)(1) (10x basis alternative); new IRC §1202(b)(4) ($15,000,000 cap) and §1202(b)(5) (inflation indexing from 2027); One Big Beautiful Bill Act, enacted 4 July 2025. Cross-checked against professional analyses from The Tax Adviser (AICPA), Baker Tilly, Holland & Knight, K&L Gates, Mintz, Davis Wright Tremaine and Grant Thornton, July–November 2025.
This states what the cited authority says. It is not tax advice, and Section 1202 qualification turns on facts about the issuing company that no page can verify for you.