83(b) election, explained

When you receive stock that vests over time, called restricted stock, the default tax rule taxes each slice as it vests, at whatever it's worth that day. An 83(b) election, named after Section 83(b) of the tax code, asks the IRS to tax the whole grant now instead, at today's value.

For founders, today's value is usually tiny. If you paid full fair market value for the shares, there's nothing to tax at all, and later growth can be taxed as capital gain when you sell.

The person receiving the stock files it, not the company. It goes to the IRS within 30 days of the transfer, on Form 15620 or as a written statement that meets the regulations. Since July 2025 Form 15620 can also be filed online through an IRS account, which gives an immediate confirmation; use one method, not both. There are no extensions, and it generally can't be revoked without IRS consent. Give the company a copy and keep proof of the date you sent it.

It covers restricted stock and options exercised before they vest, which is called early exercise. It doesn't apply to ordinary stock options you haven't exercised.

A founder receives 4,000,000 shares at $0.0001 each, pays $400 and vests over four years. With an 83(b) filed in time, her taxable income today is zero, because she paid fair market value. Without it, each vesting date is taxable. If the shares are worth $1.00 when a quarter of them vest, that's $999,900 of ordinary income from one vesting date ($1,000,000 of value less the $100 she paid for those shares), with no sale to pay the tax.

The election matters for QSBS too. For restricted stock with an 83(b), the holding period can start at grant.