83(b) Election
A tax filing that lets a founder or employee pay tax on restricted stock's value at grant, rather than as it vests.
An 83(b) election, filed with the IRS within 30 days of receiving restricted stock, lets the recipient recognize and pay tax on the stock's value at the time of grant rather than as each tranche vests over time. Filed early — ideally right at incorporation when the stock's fair market value is essentially zero — this can mean owing little to no tax now in exchange for avoiding a much larger tax bill later as the stock's value (and each vesting tranche's taxable value) rises.
Without an 83(b) election, restricted stock is taxed as ordinary income on the fair market value of each tranche as it vests, which can create a real and unwelcome tax bill for founders or early employees if the company's valuation rises significantly between grant and vesting — potentially with no liquidity to actually pay that tax.
A founder receives restricted stock at incorporation worth essentially $0 and files an 83(b) election within 30 days, paying negligible tax now. Three years later the stock is worth $8M as it continues vesting; without the election, that vesting value would have been taxed as ordinary income along the way.
File the 83(b) election within the strict 30-day window — there are no exceptions or extensions, and missing the deadline is an unrecoverable, purely administrative mistake that can cost a founder real money down the line.
What happens if you miss the 83(b) election deadline?
There's no extension or exception — missing the strict 30-day filing window means the stock will be taxed as ordinary income as each portion vests based on its value at that time, which can be a substantial and avoidable tax cost.
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