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What is an 83(b) election?

An 83(b) election tells the IRS to tax restricted stock at grant value now instead of at vest.

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In plain terms

An tells the IRS to tax restricted stock at its value when you receive it (for example, at early exercise) rather than as it vests. For early-stage equity where today's value is low, that can mean little or no tax now and capital-gain treatment later, but you must file within a strict, short window.

How the tax works

Without an , restricted stock is generally taxed as it vests, at each date's value.

With an , you accept tax on today's value up front, which is often low for early grants.

Future appreciation after the election may be treated as rather than when you sell.

The election must be filed quickly after the stock transfer, and the deadline cannot be extended.

What to check on your end

  • Whether you actually received restricted stock eligible for the election.
  • Today's value vs: what you paid (the amount taxed now).
  • The strict filing deadline after the transfer.
  • How and where to file, keeping proof of timely mailing.
  • Your risk tolerance if the stock later loses value.

Common mistake

Missing the deadline: The 83(b) window is short and strict. File late and you generally lose the election, defaulting to tax at , which can be far more expensive if the stock appreciates.

Example scenario (hypothetical)

Illustration only, not your tax situation.

Example: Jordan early-exercises shares worth about the same as the price paid, so the 83(b) income is near zero. Jordan files on time and keeps proof. If the shares later appreciate, the gain may be capital rather than ordinary, but only because the election was filed within the window.

When a CPA is worth it

  • You are unsure whether to make the election.
  • You need to confirm the exact deadline and filing steps.
  • Your stock value at grant is not clearly low.
  • You want to understand the downside if the stock falls.

Sources and notes

Primary tax claims on this page are supported by the official and secondary sources below. Broker and software links describe reporting mechanics — confirm rules against IRS or state guidance.

ISO and NSO exercise timing, AMT on ISO spread, and disposition reporting.

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VestingTax.com is not a CPA firm or tax preparer. Grants, employers, and states all differ. Use the cited IRS and state sources above, your own documents, and a qualified tax professional before you make decisions from this guide.

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