Robert B. Dellenbach
$10M Capital Gains Exclusion
Updated: Jun 26, 2020
Congress has now made permanent the 100% exclusion of capital gains (up to $10 million) on Qualified Small Business Stock acquired after September 28, 2010. Many Silicon Valley investors, including entrepreneurs and employees who hold founders stock and other equity incentives, can take advantage of this often overlooked benefit.
The basic rule says that a holder of Qualified Small Business Stock who holds that stock for at least 5 years can exclude a specified percentage of capital gains based on when the stock was acquired. That percentage is 50% for stock acquired before February 18, 2009; 75% for stock acquired between February 18, 2009 and September 27, 2010 and 100% for stock acquired on or after September 28, 2010. Some gain needs to be added back for AMT purposes on stock acquired before September 28, 2010. An article that discusses this issue in more detail can be found here.