Equity · Tax and compliance
The 83(b) election, and the 30-day deadline that governs it
What the election changes about how restricted stock is taxed, who it tends to help, how it is filed, and what happens to the tax you paid if the shares are forfeited.
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In short
What is an 83(b) election?
An 83(b) election is a written choice to be taxed on restricted stock at the moment it is transferred rather than as it vests. The filer includes the transfer-date fair market value, less anything paid, in that year’s income. Section 83(b)(2) requires it no later than 30 days after the transfer.
The default rule the election overrides
Section 83 governs property transferred in connection with the performance of services. The default in section 83(a) is that the service provider recognises income in the first taxable year in which the property is either transferable or no longer subject to a substantial risk of forfeiture. The amount is the fair market value at that point, less whatever was paid for it.
Founder stock bought at incorporation for a nominal price and subject to a four-year vesting schedule is the classic case. The shares are issued on day one, but the company can repurchase the unvested portion if the founder leaves. That repurchase right is a substantial risk of forfeiture, so under section 83(a) each tranche is measured and taxed as the risk lapses — at whatever the stock is worth on that later date.
That is the problem the election addresses. A company that succeeds is worth far more in year three than at incorporation, so vesting-date measurement can produce large ordinary income on shares nobody has sold. It also starts the capital gains holding period late, tranche by tranche.
What the election actually changes
Section 83(b) lets the service provider elect to include, in the year of transfer, the excess of the property’s fair market value at the time of transfer — determined without regard to restrictions other than those that will never lapse — over the amount paid for it. If the election is made, section 83(a) does not apply to that transfer at all. Later vesting is a non-event for income tax purposes.
| No election (section 83(a)) | Election made (section 83(b)) | |
|---|---|---|
| When income is measured | At each vesting date, as the forfeiture risk lapses | Once, at the transfer date |
| Amount included | Value at each vesting date, less amount paid for that tranche | Value at transfer, less amount paid |
| Effect of the company growing | Increases the ordinary income recognised at later vesting dates | No further ordinary income from vesting |
| Capital gains holding period | Generally starts tranche by tranche as shares vest | Generally starts at transfer |
| If the shares are forfeited | Little or no income was recognised on the forfeited shares | Section 83(b) allows no deduction for the forfeiture |
| Reversibility | Not applicable | Revocable only with the consent of the Commissioner |
Outline only. Character, basis, withholding, and state treatment all turn on facts this table does not capture.
The election is most often described as "paying tax early to pay less later." That is only true when the spread at transfer is small. If founders buy stock at its fair market value on day one, the excess in section 83(b)(1) is zero or close to it, and the election converts a large future ordinary income event into no current income at all. If a person is granted vesting stock years later at a real valuation, the same election creates a real tax bill on paper value.
The 30-day deadline is statutory
The IRS applies the usual weekend and holiday rule: where the thirtieth day falls on a Saturday, Sunday, or legal holiday, a filing postmarked on the next business day is treated as timely. That is the only slack in the deadline, and it is measured in days, not weeks. Because the filing is a paper statement rather than a return, filers commonly send it by a method that produces dated proof of mailing and keep that proof indefinitely.
How the election is filed
The mechanics the regulation describes
Fix the transfer date
Identify the date the stock was actually transferred. Everything else keys off it, and it is the single most common thing people get wrong.
Prepare a statement that meets §1.83-2(e)
The regulation requires the filer’s name, address and taxpayer identification number; a description of each property; the date of transfer and the taxable year concerned; the nature of the restrictions; the fair market value at transfer determined without regard to lapse restrictions; and the amount paid for the property.
The IRS also publishes Form 15620, Section 83(b) Election. The IRS describes the form as provided for convenience and its use as voluntary — a written statement meeting the regulation is still valid.
File it with the right IRS office
Treas. Reg. §1.83-2(c) directs the statement to the internal revenue office with which the person who performed the services files their return.
Within 30 daysGive a copy to the company
The regulation requires the service provider to submit a copy of the statement to the person for whom the services are performed. In practice this is how the company knows to reflect the election in its own records and reporting.
Keep proof, and keep it findable
The filer, not the company, carries the burden of showing a timely election years later during diligence or on audit. Store the dated mailing proof with the stock purchase agreement rather than in an email thread.
The precise mechanics have changed over the years — where the copy goes, whether anything is attached to the annual return, and whether an IRS form exists at all have all moved. Check the current IRS instructions for the form and the current text of the regulation rather than an internal checklist someone wrote for a previous financing.
Who the election is usually discussed for
Two situations dominate. The first is founders and early employees who buy restricted stock at or near its then fair market value, subject to a repurchase right that lapses with service. The spread at transfer is small, so the election has a low immediate cost and removes a growing future one. The second is early exercise of unvested stock options, where exercising converts the option into shares that are themselves subject to forfeiture — property under section 83, and therefore eligible for an election.
Restricted stock units are a different instrument. An RSU is typically a contractual promise to deliver shares in the future rather than a present transfer of property, and section 83(b) applies to transferred property. That distinction is why RSU holders are usually told the election is unavailable to them, and why the answer depends on how the specific award is drafted.
Early-exercised incentive stock options add another layer, because ISOs have their own regular-tax regime and a separate alternative minimum tax adjustment. The interaction between an 83(b) election and the AMT measurement date on early-exercised ISO shares is genuinely technical. The mechanism is set out in the companion guide to AMT and incentive stock options; the conclusion for any specific grant belongs to a CPA who has read the award agreement.
The risk nobody puts on the slide
An 83(b) election accelerates a tax payment on stock that has not been sold and may never be sellable. Section 83(b)(1) says plainly that if the property is subsequently forfeited, "no deduction shall be allowed in respect of such forfeiture." A founder who elects, pays tax on the transfer-date spread, then leaves before vesting and hands the shares back does not get that tax returned as an ordinary deduction.
The same asymmetry applies when the company simply fails. The election was made against a valuation that later went to zero. Whatever relief is available then comes through the capital loss rules, which are limited in how much can offset ordinary income in a year, not through undoing the election. This is why the election is comparatively easy to justify when the spread at transfer is a few hundred dollars and much harder when it is six figures.
What the statement has to contain
| Item | What it means in practice |
|---|---|
| Name, address, taxpayer identification number | The individual making the election, not the company |
| Description of each property | Share count, class, and issuer — enough to identify the exact block |
| Date of transfer and the taxable year | The date the 30 days run from, and the year the income falls in |
| Nature of the restrictions | The vesting schedule and the repurchase right that creates the forfeiture risk |
| Fair market value at transfer | Determined without regard to restrictions other than those that will never lapse |
| Amount paid for the property | The purchase price actually paid, which may be nominal or zero |
| Confirmation copies were furnished | Statement that a copy went to the person for whom the services are performed |
Summarised from 26 CFR §1.83-2(e). Read the regulation itself before drafting a statement.
One further point from the regulation: under §1.83-2(f) an election may not be revoked except with the consent of the Commissioner, and consent is confined to cases where the filer was mistaken about the underlying transaction and asks within 60 days of discovering the mistake. A mistake about value, or the stock later being worth less, is expressly not a ground.
Where the election shows up on the cap table
From the company’s side, the election is a document to collect and keep. Diligence in a financing or acquisition routinely asks for every 83(b) election filed by every holder of restricted stock, along with proof of timely filing. Missing elections are a standard diligence finding, and the usual remedy is a disclosure and an indemnity rather than a fix, because the deadline has long since passed.
That is a records problem as much as a tax one. The stock ledger records who owns what; the election file records how those shares are taxed. Both belong in the same place as the underlying purchase agreements rather than in personal inboxes, and both are covered in the companion guide to stock ledgers and transfer agents.
Frequently asked questions
What is the 83(b) election deadline?
What happens if I miss the 30-day deadline?
How do I file an 83(b) election?
Do I need an 83(b) election for RSUs?
Can an 83(b) election be revoked?
Is an 83(b) election worth it?
Sources
External links open in a new tab.
- 26 U.S. Code §83 — Property transferred in connection with performance of services — Cornell Legal Information Institute
- 26 CFR §1.83-2 — Election to include in gross income in year of transfer — Cornell Legal Information Institute
- Form 15620, Section 83(b) Election — Internal Revenue Service
- Update to the 2024 Publication 525 for Section 83(b) election — Internal Revenue Service
- 26 U.S. Code §56 — Adjustments in computing alternative minimum taxable income — Cornell Legal Information Institute
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The 83(b) election, and the 30-day deadline that governs it
What the election changes about how restricted stock is taxed, who it tends to help, how it is filed, and what happens to the tax you paid if the shares are forfeited.
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