OBBB Act Update: Qualified Small Business Stock (QSBS) Gain Exclusion
Brian Grigg
August 18, 2025
The One Big Beautiful Bill (OBBB) Act brings the most significant updates to Qualified Small Business Stock (QSBS) rules in decades. These changes make it easier for investors to benefit from generous tax exclusions on gains by:
Introducing tiered gain exclusions.
Raising the issuer gain limit
Expanding the gross asset threshold for qualifying businesses
If you’re planning a sale, investment, or business formation it’s suggested toconsult with a tax advisorto explore how these new provisions can benefit your tax strategy.
What is Qualified Small Business Stock (QSBS)?
Qualified Small Business Stock (QSBS) is a unique tax incentive designed to encourage investment in small, innovative companies by offering significant capital gains tax exclusions.
Eligibility Requirements
To benefit from QSBS, the following requirements must be met:
Stock must be in a U.S. C corporation
Originally issued to the taxpayer (not bought from someone else)
Company must be an active business
Gross assets at time of issuance must be:
≤ $50 million (pre-2025)
≤ $75 million (post-2025)
Before and After: Key Changes to Qualified Small Business Stock (QSBS) Under the OBBB Act
Starting with stock acquired after July 4, 2025, the new rules introduce a tiered exclusion structure, increase the gain cap per issuer, and raise the qualifying asset limit for small businesses. The following table outlines these changes by comparing the previous QSBS framework with the updated provisions, offering a clear overview of how the new law impacts eligibility, tax benefits, and planning considerations.
Category
Before OBBB Act (Pre July 4, 2025)
After OBBB Act (Post July 4, 2025)
Gain Exclusion Tiers
100% exclusion (if acquired after Sept 27, 2010) with 5-year holding
Tiered exclusion based on holding period:
• 3 years – 50% • 4 years – 75% • 5+ years – 100%
Holding Period Requirement
Minimum 5 years for any exclusion
Minimum 3 years for partial exclusion (see tiered system above)
Per-Issuer Gain Limit
Greater of: • $10M per issuer (lifetime, reduced by prior eligible gains), OR • 10× taxpayer’s basis in stock • Married filing separately: $5M
Greater of: • $15M per issuer (adjusted for inflation after 2026), OR • 10× taxpayer’s basis in stock • Married filing separately: $7.5M (half of $15M; inflation-adjusted after 2026)
Special rule:if limit exceeded in one year, limit in later years = $0
Gross Asset Threshold
$50M max (before/after issuance, incl. FMV of contributions)
$75M max for stock issued after July 4, 2025 (inflation-adjusted after 2026)
