A single 2025 date now splits QSBS into two rule sets

The record

Section 1202's qualified small business stock exclusion changed materially in 2025. The codified statute at 26 U.S. Code Section 1202 shows the amendment was enacted by Pub. L. 119-21, approved 4 July 2025, which rewrote the exclusion for stock acquired after that date into a tiered schedule, 50 percent at a three-year holding period, 75 percent at four years and 100 percent at five years or more, replacing the prior all-or-nothing five-year rule that still governs stock acquired on or before 4 July 2025. The same amendment raised the per-issuer gross-assets test from 50 million to 75 million dollars for stock issued after that date.

What the sources establish

The statute's own amendment notes state the per-taxpayer exclusion cap also split: stock acquired on or before 4 July 2025 keeps the prior 10 million dollar cap, while stock acquired after that date gets a 15 million dollar cap that, like the 75 million dollar gross-assets figure, is scheduled to rise with inflation in taxable years beginning after 2026; the older 10 million dollar cap carries no such adjustment. A second source, the IRS's own 2025 Instructions for Schedule D, confirms the practical effect for a taxpayer reporting the exclusion: it states a qualified small business is a domestic C corporation with total gross assets of 75 million dollars, or 50 million if the stock was issued on or before 4 July 2025, and it walks through how to report exclusions at the 50, 60, 75 and 100 percent rates on Form 8949 with code Q.

Scope and revision

Eligibility is not automatic for all startup stock; the statute conditions the exclusion on the issuer being a qualified small business under the applicable gross-assets ceiling both before and immediately after the stock's issuance, on the stock being acquired at original issue, and on other qualifying-trade-or-business tests the statute sets out separately. Because the 2025 amendment applies only to stock acquired after 4 July 2025, two shares of the same company's stock, one issued before that date and one after, can carry different holding-period rules, different exclusion caps and different gross-assets thresholds depending solely on the acquisition date.

The decision in front of you

This is editorial, not tax advice: a founder or early investor should not assume a round closing after 4 July 2025 automatically qualifies for the new three-year, 75 million dollar regime without first confirming the issuer meets the gross-assets and qualifying-business tests as of issuance, since the statute's conditions, not the acquisition date alone, determine eligibility.

• Was the stock acquired before or after 4 July 2025, and which holding-period and exclusion-cap schedule therefore applies?
• Did the issuing corporation's gross assets stay under the applicable 50 million or 75 million dollar ceiling at issuance?
• Is the gain being reported on Form 8949 with the correct exclusion percentage for the applicable holding period?

A statute amended mid-year creates two coexisting rule sets inside the same code section; which one applies to a given share turns on a single acquisition date, not on when the stock is eventually sold.