83(b) Election Explained: What It Is, How to File, and When It Saves You Thousands

If you've recently joined a startup and received restricted stock or early-exercised options, you've probably heard someone say: "Don't forget to file your 83(b)!" But what does that actually mean, and why does it matter so much?

This guide covers everything you need to know about the 83(b) election — from what it is and how to file, to the exact scenarios where it saves you tens of thousands of dollars. We'll walk through two worked examples at different company stages, explain the new IRS Form 15620, and give you a decision framework for when filing makes sense.

What Is an 83(b) Election?

An 83(b) election is a letter you send to the IRS within 30 days of receiving restricted stock or early-exercising stock options. Named after Internal Revenue Code Section 83(b), it tells the IRS: "I want to pay taxes on this stock now, at today's low value, instead of later when it might be worth much more."

Without an 83(b) election, you'd owe ordinary income tax on the stock's value at each vesting date — and if the company has grown, that value (and your tax bill) could be dramatically higher.

Who it applies to:

• Employees who receive restricted stock awards (not RSUs — more on that below)
• Employees who early-exercise stock options (exercising before vesting)
• Founders who receive stock subject to vesting

What Is Early Exercise (and How It Relates to 83(b))

"Early exercise" means exercising stock options before they vest. Not all option plans allow this — your grant agreement must specifically permit it. When you early-exercise:

1. You pay the exercise price to buy unvested shares
2. You receive actual shares, but the company retains a repurchase right on unvested shares (if you leave, they buy them back at cost)
3. Because the shares are subject to a "substantial risk of forfeiture" (the vesting schedule), the IRS treats them as restricted property under IRC Section 83

Without an 83(b) election, you wouldn't owe tax at exercise. Instead, you'd owe ordinary income tax each time a tranche vests — at whatever the FMV is on that future vesting date. The 83(b) election accelerates the tax event to the exercise date, when the FMV is low.

Early exercise vs. normal exercise: Normal exercise means buying shares after they've vested. There's no forfeiture risk, so tax is immediate regardless. 83(b) only matters for unvested shares — whether from early-exercised options or restricted stock awards.

How the 83(b) Election Saves You Money

The math behind 83(b) elections is straightforward — and powerful.

Example 1: Pre-Seed Startup ($0.50/share FMV)

10,000 shares of restricted stock at an early-stage startup

Example 2: Series A Startup ($5.00/share FMV)

Not every 83(b) scenario is a no-brainer. At a Series A company, the FMV is higher, which means more upfront tax:

The savings are still significant — $76,500 — but you're paying $20,400 upfront in tax on stock you haven't fully vested yet. If you leave the company after year 1, you'd forfeit 75% of those shares and lose $15,300 in taxes paid on unvested shares (recoverable only as a capital loss, limited to $3,000/year under IRC Section 1211(b)).

When you eventually sell the shares, you'll pay long-term capital gains tax (20% + 3.8% NIIT for high earners) on the appreciation — not ordinary income tax (up to 37% + 3.8%). That rate difference saves you roughly 17 cents on every dollar of appreciation.

The 83(b) Election Form (IRS Form 15620)

Since January 2025, the IRS has a standardized form: Form 15620 ("Election Under Section 83(b) of the Internal Revenue Code"). Previously, taxpayers had to draft their own letter — now there's an official form that replaces those self-drafted elections.

What the form requires:

• Your name, address, and Social Security Number
• Description of the property (number of shares, company name)
• Date the property was transferred
• Fair market value at time of transfer
• Amount paid for the property (exercise price or $0 for restricted stock)
• Any restrictions on the property (vesting schedule)

Where to mail it (IRS Service Center based on your state of residence):

• Most western states (CA, WA, TX, OR): Internal Revenue Service, Fresno, CA 93888-0002
• Most eastern states (NY, MA, NJ): Internal Revenue Service, Kansas City, MO 64999-0002
• Check the Form 15620 instructions for your specific state

How to File Your 83(b) Election: Step-by-Step

Step 1: Get your grant details from your company's equity plan administrator (Carta, Shareworks, Pulley, etc.). You need: grant date, number of shares, exercise price, and current FMV.

Step 2: Complete IRS Form 15620. Fill in all fields. If you're married and filing jointly, your spouse may need to sign.

Step 3: Mail to the IRS within 30 days of the stock transfer (grant date or exercise date). Send to the IRS Service Center where you file your annual return.

Step 4: Send a copy to your company. Your employer needs a copy for their records and W-2 reporting.

Step 5: Attach a copy to your tax return for the year of the election.

The 30-Day Deadline

This is the most important rule of 83(b) elections: you must file within 30 calendar days of receiving the stock. There are no extensions, no exceptions, and no late filings.

What counts as Day 1? The date the property is transferred to you:

• For restricted stock awards: the grant date
• For early-exercised options: the exercise date
• Weekends and holidays count in the 30-day window

EquityTax tracks your deadline automatically. Our 83(b) Election Calculator shows your exact filing deadline, adjusts for weekends, and sends reminder emails at T-7, T-3, and T-1 days so you never miss it.

Decision Framework: When to File (and When Not To)

Not every grant warrants an 83(b) election. Use this matrix to guide your decision:

When Should You NOT File an 83(b)?

Filing an 83(b) election is not always the right move. Here are situations where you might skip it:

1. The FMV is already high. If the company's 409A valuation is substantial (say, $10/share on 50,000 shares), you'd owe ~$185,000 upfront in tax on stock you haven't vested yet. If you leave before vesting, you lose the stock AND the taxes you paid.

2. The company is likely to fail. If you pay tax now and the shares become worthless, you've paid tax on income you'll never realize. You can claim a capital loss, but under IRC Section 1211(b), it's limited to offsetting capital gains plus $3,000/year against ordinary income. On a $50,000 loss with no capital gains, it takes over 16 years to fully deduct.

Worked example of a failed 83(b): You early-exercise 50,000 shares at $0.10 strike when FMV is $5.00/share. You file 83(b) and pay tax on $250,000 of ordinary income — roughly $92,500 in federal tax. The company fails two years later. Your shares are worthless. You claim a $250,000 long-term capital loss, but can only use $3,000/year against ordinary income (83+ years to recover). If you have other capital gains in those years, recovery is faster — but you've permanently lost the $92,500 in tax paid.

3. You might leave before vesting. If you're uncertain about staying at the company for the full vesting period, an 83(b) election means paying tax on shares you may have to forfeit.

4. You can't afford the upfront tax. Even at a low FMV, exercising a large grant and paying immediate tax requires cash. Make sure you can cover the tax bill.

83(b) Election and Your Long-Term Tax Plan

Filing an 83(b) election is one of the smartest tax moves for early-stage employees — but it's just one decision in a multi-year equity strategy.

Consider this: if you've early-exercised stock, you likely also hold ISOs that vest over the next 3-5 years. The timing of those ISO exercises — which years you exercise, how many shares per year — can save or cost you $50,000-$200,000 in AMT. See our AMT calculator guide for how the AMT-free limit works with ISOs, and our guide on when to exercise stock options before IPO for pre-IPO planning.

For the 2026 federal tax brackets that determine your ordinary income and capital gains rates, see our reference page.

When you file your tax return, you'll need to attach a copy of your 83(b) election and ensure your employer doesn't double-report the income at vesting. For a complete walkthrough of how all equity types — including 83(b) elections — affect your tax return, see our equity compensation tax return guide.

The employees who save the most don't just file their 83(b) — they build a comprehensive exercise plan that optimizes across all their equity grants simultaneously.

Frequently Asked Questions

Can I revoke an 83(b) election? No. Once filed, an 83(b) election is irrevocable under IRC Section 83(b)(2). You cannot undo it, even if the stock drops in value. The only exception is if the original transfer is rescinded (returned to the company) in the same tax year.

Do I file an 83(b) for RSUs? No. RSUs are not "transferred property" until they vest — there's nothing to elect on. 83(b) applies only to restricted stock awards and early-exercised options. For RSU tax planning, see our guide on how RSUs are taxed.

What if the stock becomes worthless? You can claim a capital loss when you sell or when the stock becomes worthless. Long-term capital losses offset capital gains, and up to $3,000/year can offset ordinary income under IRC Section 1211(b). If the loss is large, you'll carry the excess forward indefinitely until fully used.

Does my employer need to agree? Your employer doesn't approve or deny 83(b) elections — it's between you and the IRS. But you do need to send them a copy, and they should not report the income on your W-2 at vesting (since you already reported it at grant).

Can I file electronically? Yes. Since mid-2025, the IRS accepts electronic 83(b) elections via Form 15620 on IRS.gov. You'll need an ID.me account for identity verification. E-filing is free, provides instant confirmation of receipt, and is now the IRS-preferred method. You can still file by certified mail if you prefer — but only use one method, not both.

Can I file 83(b) for ISOs? Yes, if you early-exercise ISOs (exercise before vesting). Filing 83(b) on early-exercised ISOs is important because it starts the ISO holding period clock (1 year from exercise + 2 years from grant) needed for qualifying disposition treatment. Without 83(b), the holding period may not start until each vesting date.

What if my company is already public? 83(b) elections are rare for public company stock because the FMV is high (market price) and there's usually no discount. It could apply if you receive restricted stock with a vesting schedule at a public company, but the upfront tax would typically be substantial. RSUs — not restricted stock — are the standard public-company grant type.

How does 83(b) interact with AMT? For early-exercised ISOs, filing 83(b) means the AMT preference item (bargain element) is calculated at the exercise date FMV — typically much lower than the future vesting-date FMV. This can significantly reduce or eliminate AMT exposure. See our AMT calculator for detailed examples.