Does your midyear tax plan include selling investments? If some of those to-be-sold securities are qualified small business stocks, you may be eligible for a federal income tax benefit. The break lets you exclude from your tax return the gain on the sale of stock in certain small businesses.
How much can you exclude? For 2012 sales, the general rule is that you won’t pay tax on 50% of the gain for qualified stock you’ve owned more than five years. Currently, a 28% tax rate applies to the remaining gain.
“Qualified” generally means stock you acquired after August 10, 1993, in an active C corporation that had less than $50 million of assets at the time the stock was issued to you. That can be stock in a company you started, though not all businesses are eligible. Service companies such as law and engineering, as well as farms, hotels, and restaurants are specifically excluded.
Please call us about favorable tax breaks for small business stock investments. We’ll make sure you get the most up-to-date information.