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Does my investment qualify for QSBS tax exemption?
In theory, you should be able to claim the Qualified Small Business Stock (QSBS) tax exemption on the investments made on Wefunder the same way you could for any early-stage business that meets the requirements of Section 1202 of the tax code.
The QSBS tax exemption has a variety of requirements, including:
- The company is a US C-Corp with less than $50M in gross assets at the time the stock is issued (including the money raised in the financing)
- At least 80% of the company's assets must be used in operating a "qualified trade or business," which excludes: personal services; banking, insurance, financing, leasing, or investing; farming; mining; or operating a hotel, motel, or restaurant
- The investor is not a corporation, acquires the stock at its original issuance (ie., not a secondary purchase), and holds the stock for at least 5 years
Read more on QSBS requirements here.
We can’t guarantee that any investments made on Wefunder will qualify for QSBS. If you have questions on eligibility, we recommend speaking with your tax advisor. You can also ask founders whether they have looked into QSBS eligibility by leaving a comment on the company’s Ask a Question page.