Much of a founder's tax at exit is set at formation and the first equity grants.
Form as a C corp or convert to one, issue stock directly from the company, stay under $75M of gross assets at issuance, and run an active qualified business. The 2025 law added partial exclusions at 3 and 4 years. The exclusion is federal, and California and several other states tax all or part of the gain.
An 83(b) also starts the capital gain and QSBS holding period when the stock is issued to you. If the 30-day window is missed, there is no fix.
Starting in 2025, domestic research is immediately deductible. Unamortized 2022–2024 costs can be deducted over 2025–2026. Foreign research is still amortized over 15 years.
The election is made on a timely filed original return, after which the credit offsets employer Social Security and Medicare taxes quarterly.
The spread on ISO exercise is an AMT adjustment. Exercising early, when the spread is small, or in measured annual amounts can keep AMT low and set up long-term capital gains.
Gifted QSBS keeps its status and holding period. Planning must happen well before a liquidity event and with careful attention to anti-abuse rules.
Claim the 20% incremental and 6% small-business credits for research done in Connecticut, then file Form CT-1120 XCH with a timely return. Refunds are capped at $1.5 million a year. From 2026, partnerships and S corporations have a separate 6% credit with the same exchange.
In a consultation, we look at your cap table position, option grants, and last return, estimate the federal and Connecticut tax on the exercise or sale scenarios you choose, and tell you whether your shares may qualify for QSBS.