What is a qualified small business (QSB) stock?

Yes, you may be able to postpone paying income tax on the sale if you used the proceeds to purchase other qualified small business stock under Section 1045. If you didn’t buy other qualified stock, you may qualify to treat 50%, 60%, 75%, or 100% of the gain as tax-free under Section 1202 if you held the stock for longer than five years.

The stock bought under these terms must meet the following requirements:

•  The replacement stock is purchased within 60 days of selling the old stock.
•  The stock is from a U.S. corporation.
•  The stock was purchased during the original issue.
•  The company is a specialized small business investment company (SSBIC), or at least 80 percent of the company's assets are used to conduct a qualified active business.

Note: If your TurboTax navigation looks different from what’s described here, learn more.

1. Sign in to TurboTax, and open or continue your return.
2. Select Wages & Income under Federal from the left menu.
3. On the Your income and expenses screen either:
   1. Select Start, Review, or Edit/Add for Investments and Savings (1099-B, 1099-INT, 1099-DIV, 1099-K, Crypto) or
   2. Select Add more income first if needed. Then select the arrow for Investments and Savings 1099-B, 1099-INT, 1099-DIV, Crypto Gain/Loss Report. Then select Start for Stocks, Cryptocurrency, Mutual Funds, Bonds. Other (1099-B).
4. Answer Yes to Did you have investment income in 2023?
5. On the Let’s import your tax info screen, select Enter a different way.
6. Select Stocks, Bonds, Mutual Funds, then Continue.
7. Enter Bank or Brokerage and Continue.
8. Select No for Do these sales include any employee stock?
9. Select No (1-3) for Do you have more than three sales on your 1099-B?
10. Select Yes for Do these sales include any other types of investments?
11. Select Yes for Did you buy every investment listed on your 1099-B?, then Continue.
12. Select One-by-one for Now, choose how to enter your sales and Continue.
13. For the Sales section drop-down choose Short-term or Long-term did not receive 1099-B.
14. For Type of investment, select Stock (non-employee).
15. Enter Description, Dates, Sale Proceeds, and Basis, then Continue.
16. Select This is a small business stock on the Let us know if any of these situations apply to this sale screen and Continue.
17. Select I don’t want to make any changes to my cost basis right now and Continue.
18. Select Qualified Small Business stock eligible for the exclusion of gain (section 1202 on the What kind of small business stock did you sell? screen and Continue.
19. Adjust the gain if needed.

1. Sign in to TurboTax, and open or continue your return.
2. Go to Federal Taxes, Wages & Income, Investment Income, then Stocks, Cryptocurrency, Mutual Funds, Bonds, Other.
3. Select Start or Update or Add more sales.
4. Select Stocks, Bonds, Mutual Funds (1099-B).
5. Skip Import. Select I'll type it in myself.
6. Enter Bank or Brokerage, then Continue.
7. Select No for Do these sales include any employee stock?
8. Select No (1-3) for Do you have more than three sales on your 1099-B?
9. Select Yes for Do these sales include any other types of investments?
10. Select Yes for Did you buy every investment listed on your 1099-B?, then Continue.
11. Select One-by-one for Now, choose how to enter your sales” and Continue.
12. For the Sales section dropdown choose Short-term or Long-term did not receive 1099-B.
13. For Type of investment, select Stock (non-employee).
14. Enter Description, Dates, Sale Proceeds, and Basis, then Continue.
15. Select This is a small business stock for the Let us know if any of these situations apply to this sale screen and Continue.
16. Select I don’t want to make any changes to my cost basis right now and Continue.
17. Select Qualified Small Business (section 1045) on the What kind of small business stock did you sell? screen and Continue.
18. Enter zero for the cost of new qualified small business stock and Continue.
19. The next screen shows this as 1202 sales since no replacement was purchased.