What Is an 83(b) Election?
An 83(b) election lets you pay taxes upfront on restricted stock, so future growth is taxed as capital gains instead of ordinary income.
Normally, stock vests over time and taxes are due at each vesting date. With an 83(b) election, you elect to be taxed on the current (low) value upfront. Any future appreciation is treated as capital gains, saving potentially significant taxes if your startup grows rapidly.
Why the 83(b) Election Matters
Upside
Filing an 83(b) election early allows you to pay taxes on the current value of your stock, which is often very low or even negligible at the time of grant. This means that any future growth in the company’s value is treated as capital gains rather than ordinary income, which typically results in a lower tax rate. By locking in the tax at the initial value, founders and early employees can significantly reduce their overall tax burden if the company’s stock appreciates dramatically over time, making this a powerful strategy for wealth building in a startup.
Risk
There is a risk involved with the 83(b) election because the taxes you pay upfront are non-refundable. If you leave the company before your stock fully vests, or if the company fails and the stock becomes worthless, you will have already paid taxes on an asset that never generates any return. While the upfront payment is usually small if the stock value is low, it’s important to understand that this is a gamble: you are essentially betting on the future success of the company and must be comfortable with the possibility that the taxes paid may not yield any benefit.
Who Benefits
The 83(b) election is most beneficial for founders and very early employees, especially when the stock has little to no current value. For these individuals, filing early can dramatically reduce taxes on future appreciation. Employees who join later, when stock already has significant value, may see less benefit and higher upfront tax costs. Understanding your position in the company and the timing of your stock grant is critical in determining whether the 83(b) election is advantageous for your personal financial situation.
Filing Deadline & Rules
Filing an 83(b) election is time-sensitive, and understanding the rules is critical to ensure your election is valid. You must act promptly once your stock is granted, as the IRS imposes a strict deadline that cannot be extended under any circumstances.
The 30-day clock for filing begins on the grant date of your stock, not the vesting date. This means you must calculate your timeline carefully and plan to submit your election as soon as possible to avoid missing the window.
When filing, the completed 83(b) election statement must be mailed to the IRS office where you normally file your taxes. It is strongly recommended to send it via certified mail with return receipt requested to have proof of timely filing.
Missing this 30-day deadline has serious consequences: the opportunity to make the election is completely lost, and you will have to follow the default tax treatment on your stock as it vests, which could result in significantly higher taxes if your company’s stock appreciates.
How to File an 83(b) Election
Prepare the statement, send to IRS within 30 days, give a copy to employer, and keep one for yourself.
Step 1: Complete Election Statement
Short letter including required information (see template below).
Step 2: Make Copies
Three signed copies: IRS, employer, personal records.
Step 3: Mail IRS Copy
Use certified mail with return receipt requested.
Step 4: Keep Proof
Retain mailing receipt and IRS acknowledgment forever.
Documents & Information You’ll Need
Before filing your 83(b) election, it’s important to gather all the necessary documents and details to ensure the process goes smoothly. Having everything prepared in advance will save time and prevent errors that could jeopardize your filing.
Start with your stock grant agreement, which confirms the grant date, number of shares, and vesting schedule. This document is essential to calculate your filing deadline and verify the stock details accurately.
You will also need your personal information, including your full name, Social Security Number, and current address, to include on the election statement. Accuracy here is critical as any discrepancies can cause processing delays.
Another key piece of information is the Fair Market Value (FMV) of your stock on the grant date. If you paid any purchase price for the stock, include that as well. These values determine the amount of taxes due if you make the election.
Finally, ensure you have a completed 83(b) election statement and prepared envelopes addressed to both the IRS and your employer. Keeping a copy for yourself is also essential for your records and future reference.
Links & Templates
IRS doesn’t provide a fill-in form — submit a short letter with required info.
Best Practices
To maximize the benefits of the 83(b) election and minimize risks, it’s best to send your election in the same week as your stock grant whenever possible. Acting quickly helps ensure you meet the strict 30-day filing deadline and reduces the chance of overlooking critical steps. Always file via certified mail so you have proof of submission, and retain this documentation along with the IRS acknowledgment permanently for your records.
It’s equally important to keep copies of the election for your employer and for your personal files. This ensures all parties have verifiable records of your timely filing and helps prevent any future disputes or misunderstandings.
Finally, professional advice is essential. A qualified tax advisor or CPA can review your situation and the stock grant details, helping you avoid costly mistakes that could arise from misfiling or misunderstanding the election’s implications. The right guidance can save or cost you thousands, so never skip this step.
Need More Help?
If you need more help or haven't found exactly what you were looking for, feel free to Get in Touch. We have over 20 years of experience helping our clients who file form 83b.