San Francisco CPA firms: a genuinely different, fully remote option.

Qualified Small Business Stock (QSBS) under IRC Section 1202 just became significantly more valuable, and the rules now genuinely depend on when your stock was acquired. For stock acquired before July 4, 2025, the original rules still apply: 100% of gain is excluded from federal tax if you've held the stock more than 5 years, up to the greater of $10 million or 10 times your basis, and the company had to have $50 million or less in gross assets when the stock was issued. For stock acquired after July 4, 2025, the One Big Beautiful Bill Act added a tiered exclusion — 50% at 3 years held, 75% at 4 years, 100% at 5 years — raised the per-issuer cap to $15 million, and raised the gross-assets test to $75 million. Which regime applies to your shares is a real, consequential question, not a technicality.

Most San Francisco startups with real engineering payroll and no profit yet are candidates for the federal R&D tax credit's payroll-tax offset. A Qualified Small Business — generally under $5 million in current-year gross receipts, with no gross receipts more than five years back — can apply the credit against up to $500,000 a year of payroll tax, for up to five years, with a $2.5 million lifetime cap. See our startup accounting section for the full mechanics.

For individual equity holders, exercising incentive stock options can trigger the Alternative Minimum Tax in the year of exercise, even before you've sold a single share — a cash-tax bill on paper gains that catches people off guard every year. Planning an exercise, and separately a later sale against QSBS or ordinary capital-gains treatment, is exactly the kind of decision worth modeling before you act, not after.

California levies its own state income tax, and notably does not conform to the federal QSBS exclusion — California Revenue and Taxation Code §18152 explicitly disallows the Section 1202 exclusion at the state level, so QSBS gains that are fully excluded federally are still fully taxable on your California return. We coordinate your California return as part of a full engagement, but we want to be direct about where our specific expertise sits: deep, ongoing California tax strategy isn't the focus of this page, because our license is Washington-issued. What we bring to a California return is the same CPA-level review as everything else we prepare, coordinated with your federal return.