# What is Qualified Small Business Stock? Definition & Technical Mechanics

> **Source:** [SPIDITS AI Startup & Venture Intelligence Glossary](https://spidits.com/startup-glossary)  
> **Category:** Funding  
> **Canonical Citation:** [https://spidits.com/startup-glossary/qsbs](https://spidits.com/startup-glossary/qsbs)

## Definition
Qualified Small Business Stock (QSBS) is a US tax provision (Section 1202) that allows early startup investors and employees to exclude up to 100% of capital gains from federal taxes upon sale.

## Architectural Mechanics & Deep Dive
Qualified Small Business Stock (QSBS) is a US tax provision (Section 1202) that allows early startup investors and employees to exclude up to 100% of capital gains from federal taxes upon exit.

## Industry Applications & Real-World Use Cases
Tax optimization on startup exits

## Frequently Asked Questions

### What are the main requirements for QSBS?
The company's gross assets must not exceed $50M at the time of stock issuance, and the shares must be held for at least 5 years.

### How much tax can be excluded under QSBS?
Up to $10 million in capital gains, or 10 times the taxpayer's basis in the stock (whichever is greater).

## Related Terminology
- [exit](https://spidits.com/startup-glossary/exit)
- [venture-capital](https://spidits.com/startup-glossary/venture-capital)
- [secondary-offering](https://spidits.com/startup-glossary/secondary-offering)

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*From the SPIDITS AI Knowledge Base (300+ terms indexed). Explore full technical definitions: [https://spidits.com/startup-glossary](https://spidits.com/startup-glossary)*