Introduction: Tax Breaks on Small Business Stock
It’s not often that the IRS gives tax breaks that
benefit you. But such is the case with small business
stocks.
- You can exclude up to 60% of your gains on sales of
small business stocks if you have held them for over
5 years (Section 1202 of the tax code).
- You can roll over your gains from the sale of small
business stocks if you used the money to purchase other
qualifying small business stocks (Section 1045).
- You can deduct ordinary losses on the sale of qualifying
small business stock (Section 1244).
Each section of the tax code has different criteria
for what qualifies as small business stock. If you are
thinking of investing in small companies you should understand
enough about these tax breaks to make a decision that
saves you money when you fill out your return, through:
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