83(b) Election

An 83(b) election is an election under Internal Revenue Code section 83(b) to include in gross income, in the year property is transferred for services, the excess of the property's fair market value at transfer over the amount paid for it, rather than waiting until the property becomes substantially vested. The default rule in section 83(a) taxes restricted property as the restrictions lapse, at each vesting date's value. The election overrides that default and fixes the measurement at the transfer date. It is named directly after the subsection, and the IRS's own standardized form, Form 15620, is titled "Section 83(b) Election."

The election is not available in most of the situations people think it is, and being precise about that is the most useful thing this page can do. It applies to a transfer of property. There are three ordinary cases. The first is a restricted stock award, meaning shares actually issued now and subject to forfeiture until vesting. The second is shares acquired by exercising an option early, while they remain subject to a company repurchase right, in which case the election is made on the shares rather than on the option. The third is certain partnership and profits interests. Everything else needs checking before an election is contemplated.

There is no 83(b) election on a restricted stock unit, and the statute says so by name. Section 83(i)(7) reads that "this section (other than this subsection), including any election under subsection (b), shall not apply to restricted stock units." The reason underneath is structural rather than technical: a restricted stock unit is a contractual promise to deliver shares later, so no property has been transferred and section 83 has nothing to attach to. This is the single most common wrong question a reader brings to the subject, and it is worth stating flatly rather than hedging.

Nor is there usually anything to elect on at an option grant. Treasury Regulation section 1.83-7(a) applies section 83 at exercise, not at grant, whenever the option lacks a readily ascertainable fair market value, and section 1.83-7(b)(2) makes that value hard to establish for an option that is not publicly traded. So an instruction to "file an 83(b) on your options" is usually describing the early-exercise case above, where the subject of the election is the stock.

The 30-day deadline is statutory, which is why nothing extends it. Section 83(b)(2) provides that the election "shall be made not later than 30 days after the date of such transfer." Treasury Regulation section 301.9100-1(b) draws the distinction that decides the outcome: a regulatory election is one "whose due date is prescribed by a regulation" or by published guidance, while a statutory election is one "whose due date is prescribed by statute." Section 301.9100-3 grants discretionary extensions only for regulatory elections. The automatic extensions in section 301.9100-2 reach a closed list of specific elections, which does not include section 83(b), plus elections whose due date is the return due date, which 30 days from a transfer is not. So this is not a matter of IRS strictness. There is no authority to extend it.

One narrow timing relief does exist, and it comes from a different statute. The Form 15620 instructions note that under section 7503, if the thirtieth day falls on a Saturday, Sunday or legal holiday the election is timely if postmarked by the next business day. The regulation also permits early filing: section 1.83-2(b) says the election "may be filed prior to the date of transfer."

The filing mechanics changed in 2016 and the change is narrower than it is usually described. Treasury Regulation section 1.83-2(c), as amended by T.D. 9779, now requires "one copy of a written statement" filed with the IRS office where the taxpayer files their return, and paragraph (g) applies that version to "property transferred on or after January 1, 2016." What went away was the requirement to attach a second copy to the taxpayer's own return. What did not go away is the copy to the employer: section 1.83-2(d) still requires the person performing the services to submit a copy to the person for whom the services are performed, and to the transferee of the property if that is someone else. Form 15620 builds that undertaking into the form itself, which the taxpayer signs under penalties of perjury. "You no longer have to send copies to anyone" is wrong.

Since April 2025 the IRS has published Form 15620 as a standardized version of the statement. It is optional rather than mandatory: its own instructions say that "in the alternative, an 83(b) election may be made by filing a written statement that satisfies the requirements of Treas. Reg. section 1.83-2." Either route is filed by mail with the service center where the taxpayer files.

Revocation is available for the one thing nobody regrets, and unavailable for the two things everybody does. Section 83(b)(2) says the election "may not be revoked except with the consent of the Secretary," and Treasury Regulation section 1.83-2(f) sets out what that consent covers. It is granted only where the taxpayer was "under a mistake of fact as to the underlying transaction," and must be requested within 60 days of the date the mistake first became known. The regulation then closes the door explicitly: "a mistake as to the value, or decline in the value, of the property ... or a failure to perform an act contemplated at the time of transfer of such property does not constitute a mistake of fact." Those are precisely the circumstances in which someone would want out.

In sequence: the property is transferred, the recipient decides within 30 days whether to elect, and if they do they include the spread between the transfer date value and the amount paid in that year's income as compensation. Their basis becomes what they paid plus what they included. The vesting dates afterward are no longer tax events, and the capital gain holding period runs from the transfer.

A hypothetical example, with round numbers chosen for arithmetic rather than realism. Nadia receives 40,000 shares of restricted stock in a startup that vest 25 percent a year over four years. The shares are worth $0.05 each on the transfer date and she pays $0.05 each, so she pays $2,000 and the spread is zero. She files an 83(b) election and includes nothing in income, because there is nothing to include. A year later the first 10,000 shares vest and the stock is worth $3. Because of the election, that vesting produces no income at all. If she had not elected, section 83(a) would have taxed that tranche at its then value, producing 10,000 times $2.95, or $29,500 of ordinary compensation income in a year she received no cash. Three more vesting dates would each do the same thing at whatever the stock was worth then.

The same example run in reverse shows the cost. Suppose a different recipient, Tomas, receives 40,000 shares for nothing when they are already worth $1.50 each. He elects, and includes 40,000 times $1.50, or $60,000, as compensation income in that year, paying tax on it out of his own pocket. Two years later he leaves before vesting and forfeits every share. Section 83(b)(1) provides that "if such property is subsequently forfeited, no deduction shall be allowed in respect of such forfeiture." Treasury Regulation section 1.83-2(a) treats the forfeiture as a sale or exchange producing a loss equal to the amount paid for the property less the amount realized on the forfeiture. Tomas paid nothing, so his loss is nothing. He paid tax on $60,000 of income he never received and there is no route to recover it. Any description of an 83(b) election that says a forfeiture produces a deductible loss is wrong in the most expensive direction available.

The upside is two separate things, and the second is often the decisive one. The first is fixing the amount of ordinary income at the transfer-date spread, which for founder shares issued at formation is frequently zero or close to it. The second is that the capital gain holding period starts at the transfer rather than at each vesting date. For someone whose company might be acquired within a year of a vesting date, that is the difference between long-term and short-term rates on the whole position, and it survives even if the first benefit is small.

One interaction worth flagging rather than explaining here. An 83(b) election on shares acquired by early-exercising an incentive stock option affects the alternative minimum tax adjustment through section 56(b)(3), which operates only "for purposes of this part," meaning the alternative minimum tax rather than the regular tax. That is a different calculation from the regular-tax analysis above, and the incentive stock option page carries the alternative minimum tax mechanics.

Pros

• Converts what would be years of ordinary compensation income into a single small inclusion, or none at all when the transfer-date value equals what was paid.
• Starts the long-term capital gain holding period at the transfer date, which can matter more than the income amount if a sale comes early.
• Removes the cash-flow problem of owing tax at each vesting date on shares that cannot be sold.
• Makes the tax outcome knowable at the start, rather than depending on the company's valuation on four future dates.
• Simple and cheap to file, with an official IRS form available since 2025.

Cons

• The tax is paid up front on shares that may never be worth anything, and a forfeiture produces no deduction and, for someone who paid nothing, no loss.
• The 30-day deadline is statutory, so a missed filing cannot be fixed by any extension or relief procedure.
• Effectively irrevocable. The only route out requires a mistake of fact about the transaction, and a fall in the share price is expressly excluded.
• Requires cash at a moment when the recipient typically has none, if the transfer-date value is meaningful.
• Not available for restricted stock units, which is the form of equity most employees at established companies actually hold.