- Reasoned Reflections
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- Reflection No. 45
New week; lots to learn. This week on Reasoned Reflections we look at financial goals, avoiding lifestyle creep, and the updates to Section 1202 under the One Big Beautiful Bill Act.
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Three Quick Hits:
Article: Financial Goals
The number one thing that sets you up for an enjoyable retirement? A financial plan. Take the time to sit down and map out what goals you have for your retirement, whether it’s travel, moving closer to family, or simply enjoying peace of mind. And don’t stress about getting it exactly right. Your goals will likely evolve over time
Tip: Avoid upgrading your lifestyle every time your income rises. Instead, increase your savings rate, then selectively upgrade what truly adds value to your life.
Quote: “At its root, risk is about mystery. It focuses on the unknown, for there would be no such thing as risk if everything were known.” - Peter Bernstein
Two Questions:
What’s one thing you can do now to improve your money management skills?
What do you feel is your most pressing financial concern right now?
REFLECTION No. 45: Section 1202 Facelift
I - Issue: What should we know about the updates to Section 1202 of the Tax Code?
R - Rule: Section 1202 allows founders, early employees, and investors to exclude capital gains on qualified small business stock (QSBS) if certain conditions are met.
A - Analysis: The One Big Beautiful Bill Act, signed into law earlier this month, made Section 1202 even more generous for early-stage stakeholders. Previously, QSBS allowed for the exclusion of up to $10M or 10x basis from capital gains if stock was held for 5+ years and issued by a company with < $50M in assets.
Here’s what changed.
A. The gain exclusion cap was increased from $10M to $15M (the 10x basis remains unchanged)
B. The gross assets requirement for the issuing company increased from $50M to $75M
C. There are now tiered exclusions: (i) 50% for stock held 3-4 years, (ii) 75% for stock held 4-5 years, and (iii) 100% will still apply for stock held 5+ years
These updates expand access to tax benefits and make startup equity even more valuable for founders, employees, and investors.
C - Conclusion: The Section 1202 updates are a major win for the startup and venture community, boosting incentives to build, join, and back high-growth companies.
What did ya think of this Reflection? |