17 — Gain on Qualified Small Business Stock Updated for tax year 2025

What this line means

The portion of your gain from the sale of qualified small business stock (QSBS) that qualifies for special treatment under Section 1202. Depending on when the stock was acquired, you can exclude 50%, 75%, or 100% of the gain from income. For stock acquired after September 27, 2010, the exclusion is 100% up to $10 million or 10 times your original investment basis.

Does this apply to you?

• You sold stock in a C corporation that qualified as a small business when the stock was issued
• You held the stock for more than five years
• The corporation had gross assets of $50 million or less when the stock was issued
• You acquired the stock at original issuance (not on the secondary market)

Easy to overlook

The $10 million exclusion is per issuer, per taxpayer — but the stock must be original-issue Each qualifying company gets its own $10 million cap, and married couples filing jointly each get the $10 million limit, effectively doubling it to $20 million per company. ¹ The stock must be acquired directly from the issuing corporation at original issuance. Stock purchased on the secondary market — from another shareholder, through a tender offer, or on a private exchange — does not qualify, even if the company itself meets all the QSBS requirements. [SOURCE: IRC Section 1202 — QSBS exclusion]

The excluded gain still counts for the 7% AMT preference (pre-2010 stock only) For stock acquired before September 28, 2010, the excluded portion of the gain is a preference item for the Alternative Minimum Tax. The 100% exclusion for post-2010 stock eliminates this AMT preference entirely, making it fully tax-free with no AMT clawback. ² [SOURCE: IRS Schedule D instructions — Line 17]

Watch out for this

Assuming you qualify for the 100% exclusion without verifying the acquisition date. The exclusion percentage depends on when you acquired the stock: 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 after September 27, 2010. The dates matter.

Related lines on your return

• Line 14 — Schedule D — Long-term gain or loss from other forms (where the Section 1202 exclusion flows)
• Line 16 — Schedule D — Combined short-term and long-term result
• Form 8949 — Sales and Other Dispositions of Capital Assets (where the QSBS sale is initially reported)