Illinois Becomes the Most Recent State to Decouple From Federal QSBS Tax Treatment
By J. Christian Manalli
Federal Taxation,
September 2026
On June 16, 2026, Illinois passed legislation decoupling the state’s income tax from the federal exclusion for gain from the sale of Qualified Small Business Stock (QSBS) under IRS Code Section 1202. The change is effective for tax years ending on or after Dec. 31, 2026.
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