83(b) Election: What It Is, the Deadline, and How to File

An 83(b) election is a one-page letter to the IRS that changes when you are taxed on equity you have not yet earned. Filed correctly, it can convert a large future ordinary income bill into a small current one and start the clock on long-term capital gains. Filed late, it cannot be fixed. The deadline is 30 days, it is not extendable, and missing it is one of the more expensive administrative mistakes in private markets.

What Section 83(b) actually does

Under Section 83(a) of the Internal Revenue Code, when you receive property in connection with services and that property is subject to a substantial risk of forfeiture — unvested stock, for example — you are taxed as it vests. Each vesting date creates ordinary income equal to the value of the shares at that moment minus what you paid for them.

Section 83(b) lets you opt out of that treatment. You elect to be taxed immediately, at grant, on the full value of the unvested property, as though the restrictions did not exist. The consequences:

• Ordinary income now on the spread between fair market value and the price you paid — often zero for founders who buy shares at par at incorporation.

• No further ordinary income at each vesting date, no matter how much the company appreciates.

• Your capital gains holding period starts at grant rather than at vesting, and so does the five-year clock for qualified small business stock treatment where it applies.

The 30-day deadline

The election must be filed no later than 30 days after the date the property is transferred to you. That date is when you actually acquire the shares — the stock purchase date for founder shares, the exercise date for an early-exercised option — not the date the board approved the grant and not the date you signed a term sheet.

Three details that matter:

• Calendar days, including the weekend. Day one is the day after the transfer date.

• No extensions. There is no reasonable-cause relief and no late filing procedure. A missed election is permanent.

• Timely mailing counts as timely filing. A postmark inside the window works, which is why certified mail with return receipt is the standard approach.

How to file

1. Prepare the election. Since late 2024 the IRS has published Form 15620, a standardized 83(b) election form. Using it is optional — a properly drafted letter still works — but it removes any argument about missing required information.

2. Include the required details. Your name, address, and taxpayer identification number; a description of the property (share count, class, issuer); the transfer date and the tax year; the nature of the restrictions; the fair market value at transfer; the amount you paid; and a statement that copies were furnished as required.

3. Sign and mail it to the IRS service center where you file your income tax return. Send certified mail, return receipt requested.

4. Give a copy to the company. The issuer needs it for its own records and payroll reporting.

5. Keep your proof. Retain the signed election, the certified mail receipt, and the return receipt permanently. Since 2016 you are no longer required to attach a copy to your tax return, which makes your own file the only evidence you will have.

When an 83(b) election helps

• Founder shares at incorporation. Fair market value equals purchase price, so the election creates roughly zero taxable income and locks in capital gains treatment on all future appreciation. This is close to automatic for anyone taking restricted stock at formation.

• Early-exercised stock options. If your plan permits exercising unvested options, an 83(b) election taxes the spread at exercise — small if you exercise soon after grant — rather than at each vesting date.

• Restricted stock in a company you expect to appreciate sharply. The bet is that a small certain tax now beats a large uncertain tax later.

When it backfires

• You pay tax on value you never receive. If you leave before vesting and forfeit the shares, the tax you paid is not refunded, and your loss deduction is limited to what you actually paid for the stock.

• The company declines. Paying ordinary income tax at a $10 million valuation on shares later worth nothing is a real outcome, not a theoretical one.

• The spread is already large. Electing on shares with significant built-in gain creates a cash tax bill on an illiquid asset. Many people cannot fund it.

What 83(b) does not apply to

RSUs. Restricted stock units are a contractual promise, not a transfer of property, so there is nothing to elect on. This is the single most common misconception.

Vested shares. If there is no substantial risk of forfeiture, Section 83(b) has no work to do — you are already taxed.

Standard unexercised options. An option grant is not a transfer of the underlying stock. The election attaches to shares acquired on exercise, and only if those shares are still subject to vesting.

Why fund managers file protective elections

Section 83(b) is usually discussed as a startup employee topic, but it shows up on the fund side too. A sponsor or GP who receives a profits interest or carried interest subject to vesting is receiving property in connection with services. The prevailing view is that a profits interest with zero liquidation value at grant produces no income anyway, but managers and their counsel routinely file a protective 83(b) election within the same 30 days — the cost of filing is a stamp, and the cost of being wrong is ordinary income on the full value of the interest.

Two situations to watch when you run vehicles:

• Vesting carry. Multi-manager funds and SPV programs that vest carry across a team create a separate 83(b) analysis for each recipient, each with its own 30-day clock.

• Sponsor equity in a deal vehicle. If the sponsor takes units subject to forfeiture, treat the closing date as the transfer date and calendar the deadline immediately.

Allocations handles entity formation and fund administration for SPVs and funds, including the operating agreements that define how carry and sponsor interests vest — the documents your tax counsel will need to determine whether an election is warranted. For investors buying into private companies through a vehicle, see our guide on common stockholders and the payout waterfall.

Frequently asked questions

What is an 83(b) election? A tax election that lets you pay ordinary income tax on unvested equity at grant rather than as it vests, starting your capital gains holding period early.

What is the 83(b) deadline? Thirty days from the date the property is transferred to you. It is a strict statutory deadline with no extensions.

What happens if I miss the 83(b) deadline? You are taxed under Section 83(a) instead — ordinary income at each vesting date based on the value then. There is no procedure to file late.

Do I need to file an 83(b) election for RSUs? No. RSUs are not a transfer of property, so an 83(b) election is not available.

Where do I send my 83(b) election? The IRS service center where you file your income tax return, by certified mail with return receipt. Give a copy to the company and keep your proof of mailing.

Is there an official IRS 83(b) form? Yes. The IRS released Form 15620 in late 2024 as an optional standardized election form. A compliant letter remains acceptable.

Can I revoke an 83(b) election? Only with IRS consent, and only in narrow circumstances such as a mistake of fact, requested within 60 days of discovering it. Treat the election as irrevocable.

This article is for informational purposes only and is not legal or tax advice. Section 83(b) elections have irreversible consequences and strict deadlines — consult a qualified tax advisor before filing.