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QSBS AMT and NIIT interaction

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Quick Answer

Excluded QSBS gain is not an alternative minimum tax preference item for stock acquired after 27 September 2010.1,2

What it is

The widely repeated claim is the reverse — that the exclusion creates AMT exposure and therefore double taxation. Section 57(a)(7)'s add-back is limited by its own terms to earlier stock, and excluded gain also falls outside the net investment income tax. The portion of gain that is not excluded is taxed as 28%-rate gain rather than at 20%, which is the detail most summaries also state incorrectly.1,2

Operational context

What good looks like

Why It Matters

Getting this backwards changes the after-tax result of a qualifying disposition materially, and it is stated the wrong way round in a large amount of published material.1

Term Family

Related concepts

IRC §1202 QSBS exclusion

Frequently Asked Questions

What is QSBS AMT and NIIT interaction in venture capital?

The widely repeated claim is the reverse — that the exclusion creates AMT exposure and therefore double taxation. Section 57(a)(7)'s add-back is limited by its own terms to earlier stock, and excluded gain also falls outside the net investment income tax.

Why is QSBS AMT and NIIT interaction important for startups?

Understanding QSBS AMT and NIIT interaction is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.

Sources & References

  1. 1.irc-57 — 26 U.S.C. §57 — Items of tax preference (incl. §57(a)(7) QSBS add-back)26 U.S.C. §57 — Items of tax preference (incl. §57(a)(7) QSBS add-back)Cornell LII(Excluded QSBS gain is not an alternative minimum tax preference item for stock acquired after 27 September 2010.)primary · T1 · carry-tax · term
  2. 2.irc-1411 — 26 U.S.C. §1411 — Imposition of tax (NIIT)26 U.S.C. §1411 — Imposition of tax (NIIT)Cornell LII(Excluded QSBS gain is not an alternative minimum tax preference item for stock acquired after 27 September 2010.)primary · T1 · carry-tax · term
  3. 3.wilmerhale-qsbs — Section 1202: Qualified Small Business Stock (Apr. 15, 2025) — **pre-OBBBA; its $10M/$50M/5-year figures state LEGACY law**Section 1202: Qualified Small Business Stock (Apr. 15, 2025) — **pre-OBBBA; its $10M/$50M/5-year figures state LEGACY law**WilmerHale(Excluded QSBS gain is not an alternative minimum tax preference item for stock acquired after 27 September 2010.)primary · T1 · carry-tax · term
  4. 4.goodwin-obbba-tax — One Big Beautiful Bill Act — Tax HighlightsOne Big Beautiful Bill Act — Tax HighlightsGoodwin Procter LLP(Excluded QSBS gain is not an alternative minimum tax preference item for stock acquired after 27 September 2010.)primary · T1 · carry-tax · term

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