Wealthy Investors Used This Tax Loophole To Avoid $140 Billion in Taxes — Congress Just Made It Bigger

The QSBS exclusion under Section 1202 allows qualifying investors to avoid federal capital gains tax entirely on stock held for five years or more. (Credit: Google Gemini)

A tax provision once confined to Silicon Valley's venture capital elite is drawing a stampede of mainstream business owners. Section 1202 of the US tax code — the qualified small business stock (QSBS) exclusion — has shielded more than £111 billion ($140 billion) in capital gains from federal taxation since 2012, according to a January 2025 US Treasury Department study.

Now the secret is out. Bloomberg found that business breakfasts and investor lunches across the country have turned QSBS into the hottest talking point in tax planning. Company owners and their advisers are exploring whether their firms qualify, hoping to replicate the savings that tech founders have banked for years.