83(b): 30 days. One letter. Often six figures saved.
Section 83(b) lets you pay ordinary income tax today on the spread between the fair market value of restricted shares and what you paid for them, instead of paying tax on the (much larger) spread as the shares vest over the next 4 years. For founder stock at formation and for early-exercised options at very early-stage startups, the spread today is often zero or de minimis— meaning you pay almost no tax now, and every dollar of future appreciation gets long-term capital gains treatment instead of ordinary income. The catch: you have 30 days from the date of transfer to file, the election is irrevocable, and if you forfeit the shares before vesting, you don’t get the tax back.
Three equity grants — only two qualify
Restricted Stock Awards (RSAs)
You own the shares at grant, subject to a vesting schedule. The FMV at grant is typically pennies, so the up-front tax is trivial. Almost always a yes.
Early-exercised options (NSOs / ISOs)
You exercise before vesting, converting unvested options into restricted stock. 83(b) starts the LTCG clock and locks in today’s FMV as your basis — so subsequent appreciation escapes ordinary-income treatment.
Standard RSUs
RSUs aren’t “property” until they settle into shares — there’s no transfer to make an election on. The IRS has been clear on this for two decades.
50,000 NSOs · $0.20 strike · 4-year vest · IPO at $25
The 30-day clock starts at grant (RSA) or exercise (early-exercised options)
- Confirm FMV at transfer. Ask the company for the most recent 409A valuation (for private cos) or the closing price on the transfer date (for public cos). You’ll need the per-share FMV and the per-share amount you paid.
- Pick your filing path. The IRS introduced Form 15620 in late 2024 as the official standardized form for §83(b) elections — use it if you can. A self-drafted letter is still valid as long as it contains every element the regulation requires (template below).
- Sign and date within 30 days of the transfer. Postmark counts — the IRS accepts the mailbox rule. There is no extension, no waiver, no "reasonable cause" relief.
- Submit. Send to the IRS Service Center where you normally file your individual return. Use USPS Certified Mail with Return Receipt — proof of timely mailing is the only thing standing between you and a costly audit dispute. (Form 15620 filed via approved e-file software preserves a timestamp instead.)
- Distribute copies. Give one copy to your employer and keep one for your records. The IRS removed the requirement to attach a copy to your tax return for elections made after July 1, 2016 — but most CPAs still recommend attaching it for the paper trail.
Copy-paste 83(b) election letter
If you’re drafting your own letter instead of using Form 15620, this template contains every element Treas. Reg. §1.83-2(e) requires. Replace every [BRACKETED] placeholder before signing.
ELECTION UNDER §83(b) OF THE INTERNAL REVENUE CODE The undersigned hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, and Treasury Regulation §1.83-2, to include in gross income for the [YEAR] taxable year the amount of any income that may be taxable as a result of the property transfer described below. 1. Taxpayer Name: [Your full legal name] Address: [Street, City, State, ZIP] Taxpayer ID Number: [SSN or ITIN] 2. Property [N] shares of [Common/Preferred] stock of [Company Name], a [State of incorporation] corporation. 3. Date of transfer: [Grant or exercise date, MM/DD/YYYY] Taxable year of election: [YEAR] 4. Restrictions The shares are subject to a vesting schedule and are subject to forfeiture in the event the taxpayer ceases to provide services to the company prior to vesting. 5. Fair market value at transfer (without regard to lapsing restrictions): $[FMV per share] per share, $[FMV total] in the aggregate. 6. Amount paid for the property: $[Paid per share] per share, $[Paid total] in the aggregate. 7. Amount to include in gross income as a result of this election: $[FMV total − Paid total]. A copy of this election has been furnished to the person for whom the services were performed. Signature: ______________________________ Date: __________________ [Printed name]
Three things that can go wrong
- The election is irrevocable. Once filed, you cannot undo it — even if the company tanks and your shares become worthless. The tax you paid up front is not refundable.
- Forfeiture means lost tax. If you leave the company before your shares vest and forfeit the unvested portion, you do not recover the §83(b) tax you paid on those shares. Plan accordingly if you’re not confident in the company or your tenure.
- Cash up front. For RSAs with material FMV, or early-exercised options where the spread is non-trivial, you owe ordinary income tax in the year of the election — out of pocket, in cash. Model the cash hit before you commit.
Six things every quickstart reader asks
Can I file 83(b) on standard RSUs?
No. RSUs are an unfunded promise — they aren’t property until they settle. The IRS has consistently rejected 83(b) on RSUs. The closest analog is a §409A deferral, which is a different mechanism entirely.
What if I miss the 30-day window?
The election is lost. There is no extension, no reasonable-cause relief, no informal waiver. Some private-letter rulings have provided narrow relief for clearly clerical mistakes, but they’re expensive to pursue and rare. Treat the 30-day clock as inviolable.
Does 83(b) help with the ISO AMT problem?
Yes — early-exercising ISOs with a small spread and filing 83(b) is the textbook way to convert future ordinary AMT income into future LTCG at sale. Only worthwhile if the current spread is small (otherwise you trigger the AMT you’re trying to avoid).
Do I need to file a separate state election?
Most states conform to the federal 83(b) treatment automatically; California is the most-cited example. A handful of states require separate or modified filings — your state tax authority’s guidance (or your CPA) is the authority here.
What happens at sale, mechanically?
With 83(b) on file: your basis is the FMV at transfer (plus what you paid). Sale proceeds minus basis = capital gain. If held more than 1 year from the transfer date, that gain is LTCG. The long-term clock starts at the transfer date, not the vest date.
Should I file 83(b) on a heavily appreciated grant?
Usually no. The whole point of 83(b) is to recognize income while the spread is small. If the FMV has already 10×’d relative to your strike or the original grant price, the up-front tax bill kills the strategy. Run the math both ways.
Evolve Financial · Equity Comp Desk