Tax
The $75M QSBS Ceiling Starts Moving in 2027, and the $15M Cap Moves With It
Section 1202's $75M gross-assets ceiling and $15M gain cap start indexing for inflation in 2027. What moves, what doesn't, and why the timing matters.
By 409.AI Team - 2026-09-09
# The $75M QSBS Ceiling Starts Moving in 2027, and the $15M Cap Moves With It
Every QSBS conversation since July 2025 has run on two numbers. A company qualifies to issue qualified small business stock only if its aggregate gross assets stay under $75 million, and a shareholder can exclude up to $15 million of gain per company. Founders have been building raise plans around both, and boards have been asking whether a round pushes them over the line.
Here's the part that keeps getting skipped: neither number is permanent. Both start adjusting for inflation for tax years beginning after 2026. The first adjusted figures apply in 2027, and the IRS will publish them this autumn. If you're modeling a 2027 raise against $75,000,000 exactly, you're modeling against a number that will already be stale by the time the money lands.
What the statute actually says
The One Big Beautiful Bill Act (Pub. L. 119-21) rewrote three things in [IRC Section 1202](https://www.law.cornell.edu/uscode/text/26/1202) for stock issued after July 4, 2025: a tiered holding period paying 50% at three years, 75% at four, and 100% at five; a per-issuer gain cap of $15 million instead of $10 million; and a gross-assets ceiling of $75 million instead of $50 million.
It also bolted an inflation escalator onto the last two.
For the gain cap, Section 1202(b)(5)(A) says that "in the case of any taxable year beginning after 2026, the $15,000,000 amount in paragraph (4)(B) shall be increased" by the cost-of-living adjustment under Section 1(f)(3), with calendar year 2025 substituted as the base year. Any increase gets rounded to the nearest multiple of $10,000.
For the gross-assets ceiling, near-identical language adjusts "the $75,000,000 amounts in paragraphs (1)(A) and (1)(B)" on the same schedule, same base year, same rounding.
The mechanics under Section 1(f)(3) come down to the Chained CPI for All Urban Consumers, averaged over the 12 months ending August 31 of the preceding calendar year, measured against the 2025 base. So the 2027 figures depend on data that finished accumulating on August 31, 2026, roughly a week before you're reading this.
A codification quirk worth knowing about
If you go looking for the gross-assets indexing rule in subsection (d), where the $75 million test lives, you won't find it. The amendment directed the new paragraph to be added "at the end" of subsection (b), so it landed there instead, creating a second paragraph (4) inside subsection (b) that adjusts amounts sitting in subsection (d)(1). Practitioners generally cite it as Section 1202(b)(4), and the [AICPA's Tax Adviser](https://www.thetaxadviser.com/issues/2025/nov/qsbs-gets-a-makeover-what-tax-pros-need-to-know-about-sec-1202s-new-look/) does exactly that.
The intent isn't ambiguous. The cross-reference to "paragraphs (1)(A) and (1)(B)" only makes sense against the $75 million figures in (d)(1). But it's the reason a founder reading the gross-assets test straight through can finish it without ever learning the ceiling moves.
Roughly how much movement
The real numbers come from the IRS, not from arithmetic you or I do. The 2026 inflation-adjusted amounts arrived in Rev. Proc. 2025-32, published in October 2025, so the 2027 figures should surface on a similar schedule this October.
Still, the mechanics are worth seeing. Assume purely for illustration that the adjustment comes in at 2.5%. The ceiling increase would be $1,875,000, rounded to $1,880,000, putting the ceiling at $76,880,000. The gain cap increase would be $375,000, rounded to $380,000, putting the cap at $15,380,000.
Note where the rounding lands. It applies to the increase, not to the resulting total, which is why you get $76,880,000 rather than something tidier. Small point, but it matters if you're the company sitting $200,000 from the line.
What moves and what doesn't
This is where the asymmetry bites. The indexing in 1202(b)(5)(A) points only at "the $15,000,000 amount in paragraph (4)(B)." That's the cap for stock acquired after July 4, 2025. The $10 million cap in (4)(A), which governs stock acquired on or before that date, has no adjustment paragraph pointing at it at all. Older QSBS stays frozen at $10 million permanently.
The alternative cap in 1202(b)(1)(B), ten times your aggregate adjusted basis, isn't a dollar amount, so there's nothing to index. And the three-, four-, and five-year holding tiers don't move either. Only the two dollar thresholds do.
If you hold pre-July-2025 QSBS alongside newer stock in the same company, that split now compounds a little more every year. Our breakdown of [what OBBBA changed about Section 1202](https://409.ai/articles/qsbs-one-big-beautiful-bill-act-section-1202-changes) covers how the two vintages interact.
What it changes for a company near the ceiling
Aggregate gross assets under 1202(d)(2)(A) means cash plus the aggregate adjusted bases of other property held by the corporation. Contributed property counts at its fair market value at the time of contribution rather than carryover basis, per (d)(2)(B). And under the aggregation rules in (d)(3), a parent-subsidiary controlled group using a more-than-50% test counts as one corporation.
There are two tests, and you have to pass both. Aggregate gross assets must have stayed under the ceiling at all times before the issuance, and must be under it immediately after the issuance, counting the money you just raised.
That second test is the one that catches companies. Say you're sitting at $60 million in gross assets and you close a $16 million round. Immediately after issuance you're at $76 million. In 2026 that's over the $75 million line, and not one share issued in that round is QSBS. Run the same round in 2027 against an illustrative $76,880,000 ceiling and the whole round qualifies.
One million dollars of headroom decided whether an entire financing produced qualified stock. That's the practical shape of this.
The flip side is that indexing buys headroom, not rescue. A company at $62 million raising $16 million lands at $78 million and fails in 2027 too. If you're that company, the answer is structural: size the round differently, split it into tranches across the issuance date, or accept that this round doesn't produce QSBS. Indexing moves the line by low single-digit millions a year, which is meaningful at the margin and irrelevant if you're well past it.
The two numbers run on different clocks
This is the part worth internalizing, because it changes who benefits from the indexing and when.
The gross-assets ceiling is tested once, at issuance, and never revisited. Whatever the ceiling is in the year your stock is issued is the ceiling that determines forever whether that stock is QSBS. Nothing that happens afterward, including the company growing well past $75 million, undoes it.
The gain cap works the other way. It's applied in the taxable year you sell. So a founder who receives QSBS in 2027 and sells in 2035 has the cap compounding quietly the whole way, and the figure that governs the sale is the 2035 one, not the number in the term sheet. At a hypothetical 2.5% a year off the 2025 base, the cap would be somewhere north of $18 million by then. That's real money nobody is modeling today, because the sale is a rumor and the cap looks like a fixed number.
The same logic runs through the planning tools built on the cap. If you've been reading about [trust stacking under IRC 643(f)](https://409.ai/articles/qsbs-trust-stacking-irc-643f-treasury-guidance), remember that each stacked exclusion is a moving target too, not a static $15 million. Same for a [Section 1045 rollover](https://409.ai/articles/section-1045-qsbs-rollover-defer-gain-early-sale), where deferring gain into replacement QSBS pushes the cap that eventually applies further out in time.
A trap for fiscal-year companies
The statute conditions the adjustment on "any taxable year beginning after 2026." Read that literally, because it isn't the same as "after December 31, 2026" in practice for everyone.
A calendar-year company gets the adjusted ceiling on January 1, 2027. A company with a fiscal year beginning November 1, 2026 does not. Its current tax year began before 2027, so the flat $75 million applies right through October 2027, and the first adjusted figure only arrives with the fiscal year starting November 1, 2027. A November 2026 fiscal-year company issuing stock in September 2027 is testing against $75 million while its calendar-year peers test against a higher number.
Worth confirming with your tax adviser which taxable year controls the gross-assets test for your specific facts. The gain cap plainly turns on the selling shareholder's tax year. The gross-assets ceiling is a corporate-level test applied at issuance, and the natural reading is the corporation's taxable year that contains the issuance, but the statute doesn't spell it out and there's no regulatory guidance interpreting the new indexing yet.
What to do between now and October
If a 2027 financing might put you anywhere near the ceiling, don't lock the round size against $75 million. Wait for the revenue procedure, then model against the real figure.
Document your aggregate gross assets as of the issuance date, with the contributed-property rule applied correctly and any subsidiaries aggregated. That calculation is the thing an acquirer's diligence team or the IRS will ask you to reproduce years later, and reconstructing it after the fact is materially harder than capturing it at the time. The same discipline applies to the other QSBS conditions, including the [qualified trade or business test](https://409.ai/articles/qsbs-qualified-trade-or-business-consulting-test-section-1202) and the [redemption rules](https://409.ai/articles/qsbs-redemption-rules-stock-buybacks-section-1202) that can disqualify stock for reasons unrelated to size.
If you're raising on a SAFE, the ceiling test applies when the SAFE converts to stock rather than when it's signed, which is a separate timing question worth working through. We covered it in [SAFEs and the QSBS holding period](https://409.ai/articles/safes-qsbs-holding-period-conversion-section-1202).
And if you operate in California or New Jersey, none of this changes your state position, because those states don't conform to the federal exclusion. The [state conformity picture](https://409.ai/articles/qsbs-state-tax-conformity-california-new-jersey) is its own analysis.
A [QSBS attestation letter](https://409.ai/products/qsbs) documents the gross-assets test and the other Section 1202 conditions as of the issuance date, which is exactly the moment the ceiling gets fixed for that stock.
The takeaway
Two thresholds you've been treating as constants are constants only through 2026. From 2027 the ceiling rises a little each year and the gain cap rises with it, and the company that lands on the right side of a moving line gets QSBS for an entire round while the one that planned against last year's number doesn't.
The number to watch for is the IRS revenue procedure, due around October. Until it publishes, $75 million and $15 million are still the operative figures. After it publishes, quoting them from memory is how a founder talks themselves out of an exclusion they qualified for.
*This article is general information, not tax advice. Section 1202 planning turns on specific facts, and the interpretive questions flagged above are worth putting to your own tax adviser.*