83(b) election explained: when it is worth filing
What Section 83(b) changes, what it costs at a $0 spread and with a real spread, and when to ask a professional, with worked numbers.
Summary
Our read of the trade-off: if you paid the full fair market value for restricted shares when they were transferred to you, an 83(b) election reports $0 of income, so it costs no tax today, and it starts the capital-gains holding period at the transfer. If the election makes you report a real spread as income today, it becomes a bet: if the shares are later forfeited, Section 83(b)(1) allows no deduction for the income you reported. Without an election, Section 83(a) taxes each tranche as ordinary income when it vests, at the value it has then. Whether to elect is your decision; if you have not decided, a tax professional should run your numbers.
IRC 83(b): you report (value at transfer minus price paid) for the year of the transfer instead of (value at vesting minus price paid) at each vesting date; if the shares are forfeited, no deduction is allowed for the amount reported.
| Without an election | Ordinary income at each vesting dateValue when the shares vest minus the price paid (IRC 83(a)). |
|---|---|
| With an election | Ordinary income for the year of the transferValue at transfer minus the price paid; often $0 for founders (IRC 83(b)(1)). |
| Deadline | 30 days after the transferNo extension (IRC 83(b)(2)). |
| If shares are forfeited | No deduction for the income reportedOnly the price paid, minus any amount received back, is a loss (Treas. Reg. 1.83-2(a)). |
| Holding period | Starts just after the transfer dateInstead of at each vesting date (Treas. Reg. 1.83-4(a)). For restricted stock, the transfer is usually the grant; for early exercise, it is the exercise. |
Our read of the trade-off
At a $0 spread (full value paid, or a value close to zero, as for most founders at incorporation), the election costs no tax today and moves the holding period to the transfer date. With a real spread on shares you may not keep, it is a bet you cannot undo. When the value is uncertain or contested, or you have not decided, take the question to a tax professional. For RSUs and unexercised options there is nothing to elect. This page explains consequences with worked examples; it does not tell you whether to elect. 83(b) Election Desk prepares the filing only for people who have already decided.
Who this page is for, and who it is not for
For: founders who receive restricted founder stock, employees who early-exercise options, and holders of a simple profits-interest-like grant, still inside the 30-day window. Not for: RSU holders, people holding options they have not exercised, anyone past day 30, and anyone whose value is disputed. Those cases need a different answer than an 83(b) packet.
What changes with the election
Without an election, Section 83(a) taxes restricted property when it vests: the value at that time minus the price paid is ordinary income, tranche by tranche. With an election under Section 83(b), you report the value at transfer minus the price paid for the year of the transfer, and vesting no longer creates income. Later growth becomes capital gain when you sell, and the holding period starts just after the transfer date.
| Case | Income reported with 83(b) | Income without 83(b) | What it means |
|---|---|---|---|
| Founder: 4,000,000 restricted shares transferred at $0.0001, value $0.0001, 4-year vesting | $0 for the year of the transfer ($400 paid = $400 value) | If the shares are worth $1.00 when 1,000,000 vest in year 2: $999,900 of ordinary income that year | No tax now; no ordinary income on paper value at later vesting dates. |
| New hire: 20,000 restricted shares worth $2.00 at transfer, paid $0 | $40,000 for the year of the transfer, about $14,000 of tax now | Income only as shares vest, at their value then | A bet. If the hire leaves after a year and the shares are forfeited, no deduction for the $40,000 reported. |
Rules: IRC 83(a) and 83(b)(1); forfeiture loss limited to the amount paid minus any amount realized (Treas. Reg. 1.83-2(a)). Rates are illustrative, not your rate.
Why the forfeiture rule matters
The election is not refundable. Section 83(b)(1) says that if the property is later forfeited, no deduction is allowed for the forfeiture. Treas. Reg. 1.83-2(a) limits the loss to what you paid minus what you got back. A founder who reported $0 loses nothing by electing; a hire who reported $40,000 loses the tax on that $40,000 if the shares never vest.
When to stop and ask someone
Stop for RSUs, unexercised options, a deadline already past, a value you cannot document, incentive stock options (the election then matters for the alternative minimum tax), partnership interests that are not simple, and immigration or securities questions. A tax professional or the company's counsel should run those numbers.
Next steps
Common questions
What does an 83(b) election mean in one sentence?
You ask the IRS to tax restricted property for the year it was transferred to you, on its value at transfer minus what you paid, instead of taxing each tranche later when it vests, on its value then.
What does an 83(b) election cost if I paid full fair market value?
No tax for the year of the transfer: the income to report is $0. In exchange, vesting no longer creates ordinary income and the holding period for capital gains starts just after the transfer date (Treas. Reg. 1.83-4(a)). What stays at risk is the cash you paid for the shares. The decision remains yours.
When does an 83(b) election carry real risk?
When it makes you pay tax now on a large spread and there is a real chance you will not keep the shares: leaving before vesting, a company that may fail, or a value that may fall. Section 83(b)(1) allows no deduction for the income you reported if the shares are forfeited. A tax professional should run your numbers in that case.
Can I file an 83(b) election for RSUs or for options I have not exercised?
No. RSUs are a promise to deliver shares later and unexercised options are not property transferred to you; neither can be the subject of an 83(b) election. Early-exercised option shares can be.
Can I change my mind after filing?
Only with IRS consent, which Treas. Reg. 1.83-2(f) limits to a mistake of fact about the underlying transaction, requested within 60 days after the mistake becomes known. A fall in value is not a mistake of fact.
Already decided? Prepare the packet
The $49 packet assembles Form 15620, the company copy letter and the proof-of-mailing checklist once you have decided to file. It does not make the decision for you.
Open checkerRelated guides
83(b) election proof-of-filing checklist
The evidence checklist users should assemble around a Section 83(b) election packet.
83(b) election deadline calculator
A source-linked deadline guide for people who already decided to file a Section 83(b) election and need an operational packet before the 30-day window closes.
Form 15620 for a Section 83(b) election
A practical guide to the IRS Form 15620 fields used in a Section 83(b) election packet.
Official sources for this guide
Last reviewed: .