A walkthrough for founders and venture capitalists to position their business and investments to qualify for Section 1202’s 100% gain exclusion in 5 years For the 2026 tax year, the Section 1202 QSBS exclusion remains one of the most powerful wealth-building tools for startup founders and early-stage investors. Tax professionals who master QSBS planning can help clients exclude up to 100% of qualified capital gains. From entity structuring and gifting strategies to timing traps and compliance pitfalls, the following discussion is intended to help turn a technically complex Code section into a powerful, real – world planning opportunity. The calculator computes the exclusion assuming §1202 qualification. Before relying on the number, confirm with a CPA that your situation passes all five qualification tests: QSBS Exemption Guide: How Section 1202 Excludes Up to 100% of Founder Gain Qualified Small Business Stock under IRC §1202 lets eligible founders and early employees exclude federal capital gains tax — up to the greater of $10 million or 10× basis per issuer — when selling C-corp stock held five years. The qualification tests, the 5-year hold, the $50M aggregate-asset cap, and which. QSBS Attest provides specialist Section 1202 eligibility analysis and attestation letters for founders, small business owners, angel investors, employees, and advisors. Flat-fee pricing. IRS audit-ready documentation. Updated for 2026, this guide explains how Section 1202 Qualified Small Business Stock (QSBS) works, who qualifies, which service businesses do not, and how federal and state-level rules affect founders, investors and business owners. Every Section 1202 requirement in one checklist: entity type, gross assets, original issuance, active business, holding period, and gain cap. This is how to build a robust QSBS file, including key docs and issuer eligibility requirements, to substantiate a Section 1202 tax claim. The Section 1202 exclusion is one of the most valuable tax planning tools available to U.S. business owners and investors. It allows a non-corporate taxpayer (e.g., an individual or trust) to eliminate federal capital gains tax on the sale of ‘qualified small business stock’ (QSBS).