Running a business is challenging enough without having to decode complex tax strategies. But here’s the thing—knowing how to use tools like the Qualified Small Business Stock (QSBS) exemption and the 83(b) election can make a massive difference when it comes to reducing your tax bill and keeping more of your hard-earned money.
At Insogna CPA, we work with entrepreneurs, founders, and small business owners like you every day, helping them understand and leverage strategies that can create long-term wealth protection. Let’s break this down in a way that makes sense—so you can start using these strategies to your advantage.
What is QSBS (Qualified Small Business Stock)?
Imagine you start a business, and it takes off—really takes off. You invest a lot upfront, and five years later, your company’s value has skyrocketed. Now you’re thinking of selling your shares and making a significant profit.
But here’s the good news: if your stock qualifies as Qualified Small Business Stock (QSBS) under Section 1202 of the IRS code, you could avoid paying capital gains taxes on up to $10 million of profit.
That’s right—zero capital gains taxes on potentially millions of dollars.
Does Your Stock Qualify for QSBS?
Here’s what needs to happen:
✅ You Own Shares in a C Corporation – The business must be structured as a C Corp, not an LLC or S Corp.
✅ The Company Has Gross Assets Under $50 Million – At the time you received your shares.
✅ You Held the Stock for At Least Five Years – Patience is key here!
✅ You Acquired the Stock Directly from the Company – Shares need to be issued directly, not bought second-hand.
If your business fits this profile, you could be in for some serious tax savings. But if you’re unsure whether you qualify, Insogna CPA, a leading Austin, Texas CPA firm, can review your situation and help you make the most of this exemption.
What is an 83(b) Election and Why Should You Care?
The 83(b) election is a powerful tax-saving tool if you’re receiving restricted stock or equity compensation as a founder or early employee.
Think of it this way:
You receive shares in your company when they’re worth next to nothing. But instead of waiting for the shares to increase in value and being taxed later (when it could cost you a lot more), you can prepay taxes upfront at today’s lower valuation.
Here’s How It Works:
Say you receive 10,000 shares of restricted stock worth $1 per share.
Without the 83(b) election:
- You wait to pay taxes until the shares vest.
- If the shares rise to $10 each, you owe taxes on $100,000 in ordinary income.
With the 83(b) election:
- You pay taxes on the shares’ current value.
- At $1 per share, you only pay taxes on $10,000
If the shares later grow in value, the profit would be taxed at the lower capital gains rate instead of ordinary income rates. See the difference?
But there’s a catch—you have only 30 days from receiving your restricted stock to file the 83(b) election with the IRS. Miss that deadline, and you’ll lose out on this advantage.
👉 Need help filing on time? Our experts at Insogna CPA, one of the best CPA firms in Austin, can handle the entire process for you.
How QSBS and 83(b) Work Together for Bigger Savings
Now, here’s where things get even more interesting. When you combine QSBS and the 83(b) election, you’re creating a double tax-saving shield.
Imagine this:
- You receive restricted stock and file an 83(b) election, paying minimal taxes upfront.
- You hold the stock for five years.
- The stock qualifies for QSBS, and you sell your shares.
- You avoid capital gains taxes on up to $10 million in profit.
This combo can be a game-changer for startup founders and early investors, but only when executed properly—and that’s where Insogna CPA, a trusted small business CPA in Austin, TX, steps in.
Steps We Take to Get It Right for You
When you partner with Insogna CPA, we make sure every step is handled with precision. Here’s how we ensure you maximize your tax benefits:
Step 1: Confirm Eligibility – We review your company structure and stock issuance to confirm if you qualify for QSBS and 83(b) benefits.
Step 2: Prepare the Paperwork – Filing an 83(b) election requires precision. We prepare and submit it on your behalf within the critical 30-day window.
Step 3: Track Your Holding Period – To claim the QSBS exemption, you’ll need to hold your shares for at least five years. We track this for you.
Step 4: Ensure Compliance – Proper documentation is crucial for both elections. We keep your financial records audit-ready.
Step 5: Provide Ongoing Support – Whether you need help with tax planning or future stock events, our team has you covered.
Our clients trust us as their Austin accounting services partner because we simplify complex tax strategies while ensuring every opportunity is fully leveraged.
Why Work with Insogna CPA?
At Insogna CPA, we go beyond traditional accounting. Our focus is on helping business owners, founders, and early-stage investors like you keep more of what you’ve worked hard to build.
- ✅ Proactive Tax Planning
- ✅ Specialized in Equity Compensation
- ✅ Compliance-Driven Approach
- ✅ Expertise in High-Value Tax Strategies
Whether you’re a startup founder exploring tax-saving strategies or an entrepreneur managing restricted stock, our CPA firm in Austin, Texas provides expert guidance every step of the way.
Common Questions About QSBS and 83(b)
Q: Can I file an 83(b) election after the deadline?
A: No. The IRS requires the election to be filed within 30 days of receiving your stock grant—no exceptions.
Q: Does QSBS apply to LLCs?
A: No, QSBS is only available to C Corporations that meet specific criteria.
Q: Can I use QSBS and 83(b) together?
A: Absolutely! When combined properly, they can provide massive tax savings—but the rules are complex, which is why working with a CPA in Round Rock, TX like Insogna CPA is crucial.
Let’s Maximize Your Tax Savings Together
You’ve worked hard to build your business—don’t let unnecessary taxes take a bite out of your success. With the right strategies, you can protect your wealth, reduce your tax liability, and secure long-term financial benefits.
At Insogna CPA, we specialize in small business tax strategies and help entrepreneurs just like you make informed financial decisions.
👉 Ready to see how QSBS and the 83(b) election can work for you? Contact Insogna CPA, your trusted Austin CPA firm, today for expert tax planning guidance!