Definition
What is an 83(b) Election?
An 83(b) election is an IRS filing made within 30 days of receiving restricted stock that locks in the stock's value at grant (typically very low or zero) for tax purposes. Avoids paying tax on stock-value increases as shares vest.
Why it matters
Why 83(b) matters so much.
Without 83(b): pay tax on stock value at each vesting date.
- With 83(b): pay tax on stock value at grant ($0 or near-$0 for early founders)
- Without 83(b): if stock is worth $10/share at vesting, pay tax on $10/share each vesting tranche
- Founders can owe huge tax bills without 83(b) — sometimes more than salary
- 30-day window from stock issuance to file — non-extendable
How to file
How to file.
- Write 83(b) election letter (template from IRS or attorney)
- Sign and date
- Mail (certified, return receipt) to IRS within 30 days
- Send copy to your employer (the issuing company)
- Keep proof of filing forever — IRS often loses these
When required
When you need it.
Restricted stock scenarios:
- Founders receiving stock subject to vesting
- Employees receiving restricted stock awards (RSAs)
- Anyone receiving stock that vests over time
- Not needed for RSUs (Restricted Stock Units) — taxed differently
- Not needed for fully-vested stock at grant