100% Tax Exclusion on Capital Gains for QSBS Extended Permanently
Taxes are pretty boring but this update is important for startup founders and investors to know about:
The Protecting Americans from Tax Hikes (PATH) Act of 2015, which was enacted into law on December 18, 2015, retroactively extends certain provisions of the Internal Revenue Code (IRC) that had previously expired. — Source
tldr: holders of QSB stock (most startups should be eligible) don’t have to pay capital gains taxes on shares sold (after five years)
The 100% exclusion went away on December 31, 2014. The Path Act of 2015 retroactively re-establishes it and makes it permanent.
For startup investors, this may impact your proclivity to participate in convertible notes vs equity rounds. Please treat this as a tldr; consult your tax professional for more info.