The release of the markups to the Build Back Better Act have QSBS investors and founders worried about their eligible tax exemption. The House of Representatives has made edits to the plan, including the American Jobs Plan and the American Families Plan, in order for the budget resolution to be passed by the Senate with a simple majority vote.
The changes applicable to Qualified Small Business Stock involve, for the first time, the adjusted gross income of the shareholder. The proposal, as is, would differentiate between taxpayers who make above $400K and those who fall below that threshold, similar to the proposed capital gain hike.
For QSBS holders who have less than $400K in annual adjusted gross income, the 100% federal tax exclusion will still hold even if the bill is passed, but for those who make more, only a 50% exclusion could be possible.
Taxpayers who make more than $400K must now consider their income in combination with the date of issuance to determine the percent of exemption they are eligible for.
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.