New Jersey Adopts a QSBS Capital Gains Exclusion for the 2026 Tax Year

For tax years beginning on or after January 1, 2026, New Jersey will allow certain gains from the sale of Qualified Small Business Stock to be excluded from New Jersey Gross Income Tax if the gains already qualify for the federal QSBS exclusion. For business owners, this change can translate into more money kept after a sale and greater flexibility during negotiations. 

Importantly, New Jersey exclusion only applies if all federal QSBS requirements under IRC §1202 are satisfied, including the five-year holding period and the various issuer and shareholder tests. 

Why This Matters for Business Owners 

If you are planning to sell your company or thinking ahead toward a future exit, the tax treatment of your gain can make a significant difference. 

Under federal law, QSBS rules already allow many founders and early investors to exclude a substantial portion of their gain when selling qualified stock. New Jersey’s new rule aligns with that federal treatment, giving sellers a state-level tax benefit in addition to the federal benefit. 

This may mean: 

• You may keep more of your proceeds. 

• You may have more leverage during negotiations. 

• Buyers and sellers may structure deals differently to maximize the benefit. 

• New Jersey becomes more attractive for building and scaling a business. 

This affects the real dollars involved in a sale and may influence valuation. 

How This Could Affect Future Planning 

If you are a founder or business owner who may sell in the coming years, it is worth: 

• Reviewing whether your stock qualifies as QSBS. 

• Understanding how the federal and state rules work together. 

• Considering whether this changes your long-term exit strategy. 

• Planning early so you do not miss eligibility requirements. 

Because tax rules influence valuation and deal structure, this update may affect how buyers and sellers negotiate in 2026 and beyond. This update comes from New Jersey P.L. 2025, c.67.  

If You Need Guidance 

If you need more guidance, our Special Advisor can address tax-related questions.