In the original proposal for Biden’s Build Back Better plan, it was stated that the federal exclusion for certain qualified small business stock would still apply if the proposal passed, but there is a different story today as the House of Representatives released a partial revision of the budget plan.
Previously, holders of QSBS could exclude 50%, 75%, or 100% of their capital gain from federal taxes dependent upon the date on which it was issued. However, if the current bill were to pass as is, taxpayers who earn more than $400K in annual adjusted gross income would only be eligible to exclude 50% of their capital gain from the proposed higher tax rate.
While high earners are facing hikes on income tax, capital gain tax, and now a lower exemption on QSBS, Americans earning under the aforementioned threshold will still be able to take advantage of the exclusion, which could mean up to $10 million or 10X the adjusted basis of the stock, tax free.
CapGains Inc. is following this legislation closely and is forming a coalition to stay abreast of developments – keep up to date here.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.