Tax Reporting for Equity Crowdfunding Campaigns

Equity crowdfunding can be a great way to raise funds for your business, but it comes with specific tax and compliance obligations. Here's what you need to know:

• Funds raised through equity crowdfunding are not taxable income since they are considered capital contributions.
• Tax reporting depends on the structure of your campaign. If goods or services are offered alongside equity, those may be taxable.
• Form 1099-K is required for platforms distributing over $5,000 (2024 threshold), but equity-only campaigns without perks typically don't trigger this form.
• IRS and SEC compliance is critical. Businesses must file annual reports (Form C-AR) and maintain detailed records for at least three years.
• Investors need to track their cost basis for capital gains or losses when selling shares.

Proper documentation and professional advice are essential to avoid mistakes, comply with IRS and SEC rules, and ensure smooth tax reporting.

Crowdfunding: Do You Have to Pay Taxes on Distributions from Kickstarter and GoFundMe

How Equity Crowdfunding Differs from Other Crowdfunding Types

Equity crowdfunding operates differently from rewards-based or donation-based crowdfunding, particularly when it comes to taxes. Here's the key distinction: with equity crowdfunding, you’re selling ownership stakes in your company. Investors gain shares, not products or the satisfaction of donating to a cause. This difference shapes how the IRS treats these transactions, as we'll explore further.

In rewards-based crowdfunding, contributors get goods or services in return for their money, and the funds received are generally treated as taxable income.

Donation-based crowdfunding, on the other hand, follows a separate set of rules. When someone donates without expecting anything in return, the platform isn’t required to issue Form 1099-K. While donors may qualify for a tax deduction if contributing to a registered nonprofit, the organization receiving the funds has its own tax responsibilities.

Equity crowdfunding stands apart because the money raised is treated as a capital investment, not business income. This means the funds aren’t taxable when received. However, issuing securities introduces ongoing reporting and record-keeping responsibilities for both you and your investors.

The American Rescue Plan Act clarified that crowdfunding platforms are not required to file Form 1099-K for equity-only transactions where investors receive ownership stakes without additional goods or services. However, if your campaign includes rewards or products, reporting requirements apply. Be aware that reporting thresholds may vary and are subject to updates.

Taxable vs. Non-Taxable Income

Whether funds raised through equity crowdfunding are taxable depends on how the transaction is structured. When you sell equity, the money you receive is considered a capital contribution, not taxable income. Essentially, investors are exchanging cash for ownership in your company.

If Section 351 requirements are met, neither gain nor loss is recognized immediately. It’s important to confirm your ownership structure to ensure the proper tax treatment.

While the capital itself isn’t taxable, other aspects of your campaign might be. For instance, if you offer goods or services alongside the equity, their value could be taxable. Additionally, in some debt crowdfunding models, convertible notes may later turn into equity. Once converted, if investors start receiving dividends, the IRS might require reporting through Form 1099-OID (Original Issue Discount).

When investors eventually sell their shares, they’ll report capital gains or losses on Schedule D of Form 1040. Gains from shares held for more than a year typically qualify for long-term capital gains treatment, which comes with lower tax rates. If investors sell at a loss, they can deduct up to $3,000 in net capital losses against their ordinary income annually.

Platform Responsibilities for Tax Reporting

Crowdfunding platforms play a major role in tax compliance, and their reporting obligations can affect everyone involved in your campaign. These platforms must register with the IRS and handle their own tax responsibilities, including income tax, employment taxes (like Social Security and Medicare), and federal unemployment tax. Beyond this, they also report on the flow of funds through their systems.

For campaigns meeting certain thresholds, platforms must file Form 1099-K with the IRS. Starting in 2024, the filing threshold is set at $5,000 - a significant drop from the previous $20,000 and 200-transaction requirement. The IRS plans to lower this threshold further to $600 in the coming years.

The platform's reporting duties depend on whether goods or services are exchanged. If your campaign strictly involves selling equity with no additional perks, the platform may not need to file Form 1099-K. However, if contributors receive tangible benefits along with their equity, reporting kicks in once the $5,000 threshold is surpassed.

When filing Form 1099-K, platforms send copies to relevant parties. If funds are distributed to you as the organizer, you’ll receive the form. If the platform distributes funds on behalf of third parties, those parties will receive the form instead. This creates a paper trail for the IRS.

Platforms are also required to use SEC-compliant brokers or funding portals, as these intermediaries have their own SEC reporting obligations. Platforms must maintain detailed records of transactions, investor information, and distribution amounts for at least three years. They’re required to provide these records to the IRS upon request.

Accurate record-keeping is essential to avoid discrepancies between what the platform reports and what you include on your tax return. Any mismatch could trigger IRS inquiries or audits, so make sure your records align with the platform’s reports to ensure smooth compliance.

Required IRS Forms and Reporting Thresholds

Understanding the IRS forms and reporting thresholds is essential for staying compliant. Recent updates in reporting standards require you to adjust your documentation practices. Let’s break down the key details and how to align reported amounts with your taxable income.

Form 1099-K: Thresholds and Requirements

Form 1099-K is the go-to reporting tool for tracking crowdfunding distributions. It’s important to note that the responsibility for filing this form lies with the crowdfunding platform or payment processor - not you as the campaign organizer. However, you’ll receive a copy, and the amounts reported on it will directly influence your tax obligations.

Here’s how the thresholds have changed:

• Before 2024: Platforms only filed Form 1099-K if distributions exceeded $20,000 and involved more than 200 transactions. This left many smaller campaigns off the radar.
• Starting in 2024: The threshold has dropped significantly to $5,000, with no transaction count requirement.
• Future Plans: The threshold is expected to drop even further to $600.

Not all crowdfunding campaigns trigger Form 1099-K filings. The key factor is whether contributors received goods or services in exchange for their payments. For example, campaigns offering rewards to backers are subject to Form 1099-K reporting if distributions exceed $5,000. On the other hand, equity-only contributions, with no perks or rewards, typically don’t require the platform to file the form.

If the funds are distributed directly to you as the organizer, you’ll receive the form. If the platform distributes funds to other parties on your behalf, those parties will get their own copies. This creates multiple reporting points that all need to align with your tax filings.

Box 1 of Form 1099-K shows the gross amount of distributions made during the year. This is where confusion often arises. The IRS has clarified in fact sheet FS-2024-28 that receiving a Form 1099-K doesn’t automatically mean the entire amount is taxable. The tax treatment depends on your campaign’s specifics and how the funds were used.

Matching Form 1099-K Amounts with Taxable Income

Once you understand the filing thresholds, the next step is reconciling the reported amounts with your taxable income.

The gross amount on Form 1099-K is rarely the same as your actual taxable income from an equity crowdfunding campaign. This distinction is critical for accurate tax reporting and avoiding potential IRS scrutiny.

Here’s why: the funds received through crowdfunding are often not taxable income. When you’re selling ownership stakes, you’re not generating revenue from business operations. As a result, you shouldn’t include the total amount from Form 1099-K as taxable income on your return.

To reconcile these amounts, you’ll need thorough documentation. Start by breaking down the reported total to identify what portion represents pure equity investments versus any goods or services provided to contributors. If your campaign offered rewards or perks, only those portions might be taxable, depending on how they were structured.

If the IRS notices discrepancies between your Form 1099-K and your tax return, they’ll likely ask for clarification. While this isn’t necessarily a problem, you’ll need strong documentation to explain why certain amounts weren’t reported as income. This includes proving that the funds were capital contributions rather than taxable receipts.

To stay prepared, keep detailed records for at least three years. This includes campaign structures, investor agreements, offering documents, subscription agreements, and all communications with contributors. Clearly document whether participants received equity only or equity combined with additional benefits.

Reconciling Form 1099-K with taxable income often requires professional help. Tax professionals can assist in categorizing funds, determining which portions (if any) are taxable, and ensuring your tax return accurately reflects the nature of your crowdfunding campaign. This is especially important because mismatches between Form 1099-K and your reported income can lead to additional tax assessments, interest charges, and penalties.

If your campaign involved convertible notes rather than direct equity, additional tax considerations come into play. For instance, these instruments may generate Form 1099-OID when they convert to equity, adding another layer of complexity. Similarly, if your business later distributes dividends or makes payments to crowdfunding investors, those transactions have separate tax implications from the initial capital raise.

Working with a CPA or tax advisor before filing your return can save you from costly mistakes. They can review your Form 1099-K, analyze your campaign structure, and determine the correct tax treatment for all received amounts. Taking this proactive approach is far less stressful - and often less expensive - than dealing with IRS inquiries after your return has been flagged.

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Financial Disclosure Requirements

In addition to meeting IRS obligations, equity crowdfunding campaigns come with SEC disclosure requirements designed to protect investors by ensuring access to accurate financial information. The level of disclosure you need to provide depends on how much money you're raising. Falling short of these standards can delay your campaign or even result in regulatory penalties. These requirements go hand in hand with the tax reporting responsibilities mentioned earlier.

Financial Statement Requirements by Offering Size

The SEC uses a tiered system for financial disclosures, with stricter rules as the size of your offering increases.

• For offerings of $100,000 or less:
  You must disclose total income, taxable income, and total tax as stated in your federal income tax returns, with this information certified by your CEO. Additionally, you need to provide financial statements certified by your CEO. If you already have reviewed or audited financial statements from an independent public accountant, you can submit those instead ^[1].
• For offerings between $100,001 and $500,000:
  Reviewed financial statements prepared by an independent public accountant are required. This strikes a balance between providing investor confidence and avoiding the cost of a full audit ^[1].
• For offerings exceeding $500,000:
  • If it’s your first crowdfunding campaign, reviewed financial statements will suffice.
  • For repeat issuers, audited financial statements are mandatory for subsequent campaigns. Audits involve a detailed examination of your financial records and internal controls by an independent certified public accountant, offering investors the highest level of assurance ^[1].

All equity crowdfunding campaigns must go through a registered broker or funding portal intermediary. Direct offerings to investors are not permitted under Regulation Crowdfunding ^[1].

If you’re planning to raise over $100,000, it’s wise to engage an independent accountant early in the process. Reviews and audits take time, and starting early can help avoid delays.

Annual SEC Reporting

Beyond the disclosures required for your offering, you’ll also need to meet ongoing annual SEC reporting obligations. Specifically, you’re required to file an annual report on Form C-AR and post it on your website within 120 days after the end of your fiscal year ^[1]. This report updates much of the information from your original offering statement, although it doesn’t include offering-specific disclosures. While your CEO must certify the accuracy of the financial statements, reviewed or audited statements aren’t required for these reports unless they’ve been prepared for other purposes ^[1].

Mark your calendar for the 120-day post-fiscal year deadline as soon as your campaign closes. Missing this deadline or submitting incomplete information can lead to SEC enforcement actions and harm your reputation with investors.

Additionally, keep your records organized and accessible for at least three years ^[3]. Well-maintained records not only simplify annual reporting but also reduce the risk of errors during potential IRS or SEC audits.

If you're unsure about how to set up effective financial record-keeping systems or meet your SEC disclosure requirements, consider consulting experienced financial advisors, such as the team at Phoenix Strategy Group (https://phoenixstrategy.group). Their expertise can help you stay compliant and focused on your business goals.

Reporting Capital Gains and Investment Sales

When it comes to selling equity crowdfunding stocks, the process aligns with standard capital gains rules. Whether you've held onto your shares for years or are approaching the required holding period, accurate reporting is essential for avoiding mistakes and making the most of available tax benefits.

How to Report Capital Gains and Losses

To report your gains and losses, you'll need to use Schedule D of Form 1040^[4]. This form requires three key pieces of information: the sale price, the cost basis, and the holding period. For example, if you invested $5,000 in an equity crowdfunding campaign and received 500 shares, your cost basis is $5,000. The difference between the sale price and your cost basis determines whether you've made a gain or incurred a loss.

Equity crowdfunding rules typically require a one-year holding period before you can sell your shares. This restriction often means that sales qualify as long-term capital gains, which are taxed at preferential rates of 0%, 15%, or 20%, depending on your income level. If your investments result in a loss, you can use any excess net capital losses to offset gains from other investments. Additionally, you can deduct up to $3,000 per year against ordinary income^[4]. Be sure to keep thorough records of purchase and sale dates, amounts, and share counts for at least three years^[3].

Next, let’s look at how Qualified Small Business Stock (QSBS) benefits might further reduce your tax liability.

Qualified Small Business Stock (QSBS) Tax Benefits

In addition to standard capital gains rules, QSBS provisions can offer unique tax advantages. Many equity crowdfunding investments may qualify for these benefits. Under the Internal Revenue Code, QSBS provides favorable tax treatment for investments in small businesses. Since many equity crowdfunding ventures involve early-stage startups, there’s a chance their stock could meet QSBS criteria.

To qualify, the company must meet certain requirements. Specifically, its gross assets must not exceed $50 million at the time of stock issuance, and at least 50% of its gross receipts over the past five tax years must come from active business operations. Passive income sources - such as royalties, rents, dividends, interest, annuities, or gains from stock or securities trades - don’t count toward this threshold^[4]. If the company has been in operation for less than five years, it can calculate these percentages based on its available tax history or, if applicable, its first year of operations.

Before assuming your investment qualifies for QSBS benefits, verify eligibility with the company. Confirm whether the stock is intended to meet QSBS criteria and consult a tax professional to ensure you understand the tax benefits available when selling.

While tax advantages like QSBS can play a role in investment decisions, they should always be weighed alongside a thorough evaluation of the company’s fundamentals and growth potential. If you’re managing multiple equity crowdfunding investments or need help navigating QSBS qualifications, working with experienced financial advisors - such as Phoenix Strategy Group (https://phoenixstrategy.group) - can help you optimize your tax strategy while keeping your documentation in order throughout your investment journey.

Record-Keeping and Documentation

After reconciling tax forms, maintaining thorough and accurate records becomes essential for both audit protection and meeting regulatory requirements. Proper documentation not only safeguards your business during tax season but also ensures you're prepared for any audits. The IRS mandates that specific records be kept, and missing documentation can lead to complications, especially when reconciling Form 1099-K amounts or explaining why certain crowdfunding proceeds are exempt from taxes.

Documents to Keep for Tax Reporting

A well-organized record-keeping system should capture every important detail of your crowdfunding campaign. Start with investment agreements that outline the terms of each equity investment. These agreements clarify what investors received for their contributions and serve as the basis for calculating future capital gains.

You'll also need transaction records from your crowdfunding platform, showing all contributions received. Be sure to save copies of Form 1099-K and matching bank statements. Form 1099-K is issued by the platform or payment processor when distributions total $5,000 or more in a calendar year^[6].

Your SEC filing documents are another critical part of your records. These include:

• The initial Form C offering statement
• Annual Form C-AR reports, which must be filed within 120 days of your fiscal year-end^[1]
• Financial statements (certified, reviewed, or audited, depending on your offering size)
• Supporting documents for offerings between $107,000 and $500,000 (reviewed statements are required)
• For first-time offerings exceeding $500,000, reviewed statements are needed, with audited statements required for companies with prior crowdfunding securities sales^[1]

Additionally, retain cap table records that detail investor ownership. These records should show ownership percentages, the number of shares issued, the price per share, and the total investment amount. When investors sell their shares, these details will be necessary for calculating capital gains or losses.

Save all correspondence with your crowdfunding platform, including emails confirming offering details, investor communications, fund transfer confirmations, and compliance notices. If you consulted tax professionals or advisors during the process, keep copies of their written opinions on tax treatment - these can be invaluable if the IRS questions your filings.

Document how funds were allocated and used. This supports the accuracy of your financial statements and SEC filings. If equity was issued, maintain detailed records of each investor's purchase agreement, share certificates, and any applicable vesting schedules.

All of these documents are key to meeting IRS retention requirements.

IRS Record Retention Rules

The IRS requires organizers of crowdfunding campaigns - and anyone receiving funds from such efforts - to keep complete and accurate records of all fundraising activities and fund usage for at least three years^[3]. This aligns with the IRS statute of limitations for most tax audits.

However, holding onto records for longer than three years can be wise. The IRS can extend the audit period to six years if there’s evidence of significant underreporting of income. For equity crowdfunding, retaining records beyond the minimum period is especially prudent, as company growth or acquisition discussions could invite additional tax scrutiny.

To streamline this process, consider using digital storage with reliable backups. A master spreadsheet can help track investor contributions, dates, and any subsequent transactions like secondary sales or dividend payments.

Organize your records by category to make retrieval easier when needed. Suggested categories include:

• Investor details (names, addresses, investment amounts, and dates)
• Platform communications
• SEC filings and financial statements
• Bank and payment processor statements
• Internal cap table documentation

If Form 1099-K is issued but the crowdfunding distribution isn’t taxable - such as for charitable campaigns - report the amount on your tax return and include an explanation to avoid IRS inquiries^[8]. Proper documentation is crucial for justifying why certain distributions shouldn’t be treated as taxable income.

For businesses handling complex equity crowdfunding transactions or multiple investment rounds, working with experienced financial advisors can make a big difference. Firms like Phoenix Strategy Group (https://phoenixstrategy.group) offer fractional CFO services and financial guidance to growth-stage companies. They can help implement systems for managing SEC filings, tracking investor details, and ensuring accurate tax reporting.

Working with Tax Professionals

Handling the tax complexities tied to equity crowdfunding can be tricky, especially since it involves a mix of securities regulations, IRS reporting requirements, and investor tax obligations. For most business owners, this isn't something they can - or should - navigate alone. Professional guidance can help you avoid costly mistakes and keep everything on track.

When to Hire a CPA or Tax Advisor

Bringing in a tax professional before you launch your crowdfunding campaign is crucial. The decisions you make during the setup phase can carry long-term tax consequences, many of which are hard to fix later.

For campaigns raising more than $100,000 or involving complex instruments like convertible notes, expert advice is a must^[1]. At this level, your financial disclosures often shift from simple certified statements to more detailed reviewed or audited financials. If it’s your first time running a crowdfunding campaign, professional guidance can help you navigate disclosure rules and set up proper reporting systems from the start^[1].

If your funding efforts exceed $500,000, you're likely required to provide audited financial statements^[1]. And if your company qualifies for potential tax benefits under the Qualified Small Business Stock (QSBS) provisions, you'll need to ensure all necessary documentation is in place early on to secure those advantages^[4].

Tax professionals also play a key role in meeting SEC reporting deadlines, which require filings within 120 days of your fiscal year-end^[1]. Additionally, if you’ve distributed payments exceeding $600 in a year, an expert can help ensure everything is reported correctly.

For businesses juggling multiple investment rounds, complex cap tables, or ongoing SEC filings, firms like Phoenix Strategy Group (https://phoenixstrategy.group) offer fractional CFO services. These services go beyond basic tax compliance, helping you manage investor records, regulatory filings, and plan for future funding or exit strategies.

Getting the timing right and setting up solid systems early can save you from headaches later, as we’ll explore in the next section.

Common Tax Reporting Errors to Avoid

Even with a solid strategy, there are common mistakes that can derail your tax reporting. Here are some pitfalls to watch for:

Misclassifying Funds
Not all funds raised are taxable. The tax treatment depends on the nature of the contributions[2, 4]. For instance, some funds might represent loans, returns of capital, or non-taxable equity investments. A common error is assuming all funds are taxable income - or worse, treating taxable income as non-taxable simply because it came through crowdfunding. The IRS looks at the substance of transactions, not just the labels.

Inadequate Record-Keeping
The IRS requires you to maintain detailed records of all fundraising activities and fund distributions for at least three years^[3]. Without proper documentation, defending your tax positions during an audit becomes much harder.

Form 1099-K Errors
Mistakes with Form 1099-K can take several forms. Some businesses fail to file it when required, while others forget to send copies to the right recipients[2, 4]. Another common issue is assuming every amount reported on Form 1099-K is taxable income. If part of the reported amount isn’t taxable, you’ll need proper documentation to back up your claim.

Convertible Note Complications
Businesses often overlook the need to issue Form 1099-OID to investors holding convertible notes. The IRS considers accrued interest on these notes as taxable income each year^[2]. When the notes eventually convert to equity, the tax treatment changes, often requiring Schedule K-1 forms for reporting dividend income^[2].

Inconsistent SEC Filings
Discrepancies between financial statements filed with the SEC and what’s reported on your tax returns can trigger compliance issues. Using different accounting methods for tax reporting versus SEC filings - or missing the SEC’s strict 120-day reporting deadline - can create unnecessary complications^[1].

Poor Investor Documentation
Failing to keep accurate cap table records - such as purchase dates, amounts invested, and share quantities - can make it difficult to calculate capital gains when investors sell their shares. Proper documentation ensures investors have the necessary information for their own tax reporting.

To avoid these issues, it’s essential to set up strong systems from the beginning. Work with a tax professional to classify funds correctly and establish organized record-keeping practices. Keep detailed records of contributions, amounts received, any benefits provided, and all Form 1099-K documents. Regularly reconcile this information with your accounting records.

Additionally, coordinate with your crowdfunding platform to ensure accurate tax reporting and confirm that all necessary forms are filed. Partnering with experienced advisors can help you meet deadlines and stay on top of your documentation requirements.

Conclusion

Navigating tax reporting for equity crowdfunding campaigns is no small task. As highlighted in this guide, the funds raised through equity crowdfunding are considered capital contributions, not taxable income^[7]. However, this doesn’t mean you can skip reporting obligations - it just shifts your focus to keeping detailed records, managing investor information, and meeting SEC filing requirements.

To stay compliant, ensure you maintain accurate records of every investor contribution, the dates funds were received, how the funds were used, and any relevant tax forms^[3]. It’s also important to remember that amounts reported on Form 1099-K don’t automatically equal taxable income. The IRS looks at the nature of each transaction, making proper classification essential from the start.

The level of financial disclosure required depends on the size of your offering^[1][5]. Missing SEC filing deadlines can lead to serious compliance issues, so staying on top of these is critical.

For investors, keeping accurate cost basis records is just as important. When selling equity, these records are key to correctly calculating and reporting gains or losses on Schedule D. Proper documentation at every stage ensures smoother reporting and fewer headaches later.

Given the intricate requirements of equity crowdfunding tax reporting, working with a knowledgeable CPA can be a game-changer. A professional who understands both securities regulations and IRS rules can help you avoid errors that might trigger audits or penalties. For businesses juggling multiple funding rounds or planning for future exits, financial advisory services can also help establish systems that scale with your growth.

Start strong by prioritizing detailed record-keeping and proper fund classification from the outset. Early decisions during your campaign setup can have long-term tax implications that are tough to fix down the road. With careful planning and expert guidance, you’ll be able to focus on growing your business while staying compliant with tax regulations. To streamline your financial reporting processes, consider reaching out to Phoenix Strategy Group at https://phoenixstrategy.group.

FAQs

What are the tax reporting requirements for equity crowdfunding campaigns, and how do they differ from other crowdfunding types?

Equity crowdfunding campaigns come with distinct tax reporting requirements that set them apart from other crowdfunding types like donation-based or rewards-based models. In equity crowdfunding, the funds raised are generally viewed as investments, not income, meaning they aren’t immediately taxable. However, businesses must still report these transactions accurately to the IRS and keep detailed records to stay compliant.

Some important aspects to consider include issuing Form 1099-DIV or Form 1099-INT to investors if dividends or interest payments are made. Additionally, businesses need to track any capital gains or losses tied to the equity issued. It’s crucial to separate these transactions from regular revenue streams to avoid confusion and ensure proper reporting. Consulting a tax professional can make this process much smoother. For growing companies, partnering with experts like Phoenix Strategy Group can help streamline compliance with tax laws.

What steps should businesses take to comply with IRS and SEC regulations during an equity crowdfunding campaign?

To stay on the right side of IRS and SEC regulations during an equity crowdfunding campaign, businesses need to prioritize precise financial reporting and compliance with legal standards.

For IRS requirements, it's essential to classify the funds raised correctly - whether as income or equity - depending on the campaign's structure. Keep thorough records of every transaction, including investor information and the amounts raised. These records will play a key role in ensuring accurate tax filings.

For SEC compliance, adhere to all disclosure rules outlined in Regulation Crowdfunding. This includes sharing accurate financial statements and detailed information about the campaign with potential investors.

Seeking advice from financial professionals, like fractional CFOs or tax advisors, can make navigating these regulations much smoother. Firms such as Phoenix Strategy Group specialize in offering guidance to help businesses manage compliance and reduce the risk of costly errors.

What tax considerations should equity crowdfunding investors be aware of, including capital gains and Qualified Small Business Stock (QSBS) benefits?

Investing in equity crowdfunding campaigns can come with tax considerations, largely influenced by the type of investment and how long you hold onto your shares. For starters, capital gains taxes kick in when you sell shares at a profit. If you’ve held those shares for over a year, you might benefit from lower long-term capital gains tax rates.

There’s also the potential for Qualified Small Business Stock (QSBS) benefits under Section 1202 of the Internal Revenue Code. If your investment meets the criteria, you could exclude a significant portion - or even all - of your capital gains from taxes. However, to qualify, you’ll need to hold the stock for at least five years and meet other specific conditions. Since tax rules can get complicated, it’s a smart move to consult a tax professional to navigate your unique situation and stay on the right side of IRS regulations.

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