The 83(b) election

Ben paid $40 for 4,000,000 shares of Northwind. One year later, he can owe the IRS up to about $148,000 because of those shares, and he did not sell one of them. The cause is a one-page form that he did not file in his first 30 days. This lesson shows the rule, the math, and how to file the form in 2026.

Without the election, each vesting date is taxable

Section 83 of the US tax code gives the tax rules for restricted stock. This is stock that you own, but that the company can buy back until it vests. Founder stock with a vesting schedule is restricted stock. Section 83 says that the IRS taxes each part of the shares when it vests.

The taxable amount is the value of the shares on the vesting date minus the price that you paid. The IRS taxes this amount as ordinary income, the same as a salary.

For founders, this is a trap. The value of the shares can grow fast, for example after a seed round. Each vesting date then gives taxable income. But the shares give the founder no cash to pay the tax.

Predict first

Ben did not file the election. At his 1-year cliff, a share of Northwind common stock is worth $0.40, and 1,000,000 of his shares vest. How much taxable income does that one vesting date give him?

Type a guess before you continue. A guess first, even a wrong one, makes the answer easier to remember.

Your guessSave my guess

What the 83(b) election does

An 83(b) election tells the IRS to tax you now, on the day that you get the shares, and not as they vest. The taxable amount is the value on that day minus the price that you paid. A founder pays the full value on day one, so the difference is $0, and the tax is $0.

After the election, vesting causes no tax. You pay tax when you sell the shares, usually at capital gains rates. This is the comparison for Ben:

With the election, at purchase:
Income = 4,000,000 × ($0.00001 − $0.00001)
       = $0

Without the election, at the cliff:
Income = 1,000,000 × ($0.40 − $0.00001)
       = $399,990
Tax    ≈ 37% × $399,990 ≈ $148,000

The 37% rate is the top federal rate, so $148,000 is a simple upper estimate. The real federal tax depends on the tax brackets and the other income of the founder. State tax and payroll tax can add more.

The bill does not stop at the cliff. After the cliff, 83,333 more shares vest each month, and the IRS taxes each part at its value in that month. Stripe gives an example of a company worth $20M with 10,000,000 shares, so a share is worth $2.00. A founder with 4,000,000 shares vests 1/48 of them each month. Our calculation for one month:

Shares each month = 4,000,000 ÷ 48
                  = 83,333.33
Income each month ≈ 83,333.33 × $2.00
                  ≈ $166,667

The price that the founder paid is so small that it does not change this result.

The worked example below follows Ben for four years without the election. It assumes that the value of a share grows in a straight line, from $0.40 at the cliff to $2.00 at month 48.

Worked example · step 1 of 5

Ben's tax without the election, by year from the grant

1. 1

   Year 1: the cliff

   At month 12, 1,000,000 shares vest at once, at $0.40 a share.

   Income = 1,000,000 × ($0.40 − $0.00001)
          = $399,990
   Tax    = 37% × $399,990
          = $147,996

Show step 2Show all steps

Now set your own values. Look at how the tax adds up when there is no election.

Calculator

Tax now or tax as the shares vest

Ben bought his shares at $0.00001 each, their full value on that day. They vest over 4 years with a 1-year cliff. Set what a share is worth later.

Ben’s shares

Tax rate on ordinary income

37%

37% is the top federal rate.

Share value at the cliff

$0.40

Share value at month 48

$2.00

With 83(b)

$0

Tax at grant

No 83(b): cliff

$147,996

Tax on $399,990

No 83(b): 4 years

$1.5M

Tax on $4.07M

Cash to Ben

$0

He sold nothing

• Without an 83(b) election
• With an 83(b) election

Without the election, the cliff alone gives Ben $399,990 of taxable income: 1,000,000 shares × ($0.40 − $0.00001). At 37%, the tax is $147,996. After that, 83,333 shares vest each month, and each month adds income at that month’s value.

With the election, Ben reports the value at grant minus the price he paid: $0.00001 − $0.00001 = $0 a share. His tax is $0, and later vesting adds no tax. He pays tax when he sells, and the sale gives him the cash to pay it.

A missed election has one more cost. Without the election, the holding period for QSBS starts at each vesting date, not at the purchase date. This delays a large tax benefit, as the lesson on QSBS shows.

The election is not always $0. If you buy shares for less than their value, the election taxes the difference at once.

Work it out

A cofounder joins later and buys 1,000,000 restricted shares at $0.01 each, when they are worth $0.10 each. She files an 83(b) election. How much income does the election report?

Your answerCheck

Work it out

Ben did not file. In month 24, 83,333 of his shares vest, and a share is worth $1.00. How much income does that month add?

Your answerCheck

The 83(b) election applies to restricted stock with a vesting schedule. Standard stock options are different. The lesson on exercise and taxes covers options.

Do I need to file if the company files for us?

The election is a personal tax election. Each founder files one for their own shares, signs it, and gives a copy to the company. An incorporation service or a lawyer can prepare it or send it for you. But the deadline and the proof are yours. Ask for the confirmation or the certified-mail receipt, and keep it with your tax records.

The 30-day deadline

You must file the election not later than 30 days after the company transfers the shares to you. If day 30 is a Saturday, a Sunday, or a legal holiday, the deadline moves to the next business day. Congress wrote the deadline into the law, so the IRS cannot extend it.

These are examples from 2026:

• Shares on Wednesday, November 4, 2026. Day 30 is Friday, December 4, 2026.
• Shares on Thursday, November 5, 2026. Day 30 is Saturday, December 5. The election is on time if you file it, or mail it with a postmark, by Monday, December 7, 2026.
• Shares on Tuesday, December 1, 2026. Day 30 is Thursday, December 31, 2026, the last day of the year.

Enter the day that you got, or will get, your shares.

Calculator

Your 83(b) deadline

Enter the day that the company issued your shares to you. The election is due 30 days later.

The day you got the shares

Day 30

Fri, Dec 4, 2026

A weekday

File by

Fri, Dec 4, 2026

Day 30

Days left

—

You got the shares on Wednesday, November 4, 2026. Day 30 is Friday, December 4, 2026. File online or mail the form with a postmark by that day. A legal holiday on day 30 moves the deadline later, so this date is always safe.

Do not wait for the last day. File in the first week, and keep your proof of the filing.

How to file in 2026

The IRS form is Form 15620, “Section 83(b) Election” (revised April 2025). The IRS released the first version in November 2024. A written statement that obeys Treasury Regulation §1.83-2 is also valid. You can file in two ways.

Online

The IRS lists Form 15620 among its online forms with the note “Online Account required.” It posted the form there on June 29, 2025. Do these steps:

1. Sign in to your IRS Online Account with ID.me or Login.gov.
2. Complete Form 15620.
3. Submit the form.
4. Download the confirmation and keep it.

The IRS page also says that if a secondary signer has an ITIN, “you will need to mail your form.” An IRS Online Account needs an identity check through ID.me or Login.gov. If you cannot complete that check in time, file by mail. The form instructions describe mail, so mail is always a valid method.

By mail

The printed instructions on Form 15620 describe mail. Do these steps:

1. Complete and sign Form 15620.
2. Mail it to the IRS office where you file your tax return.
3. Use USPS Certified Mail with a return receipt.
4. Keep the receipts.

After you file

Two more steps complete the election:

• Give a copy of the election to the company.
• Keep your own proof: the online confirmation, or the certified-mail receipts.

You do not attach the election to your tax return. This rule applies to transfers on or after January 1, 2016. Some incorporation services, such as Stripe Atlas, include the 83(b) filing in their price. Even then, make sure that the filing occurred in time.

Quiz · question 1 of 5

Test what you learned

A founder gets restricted stock with a vesting schedule on Wednesday, November 4, 2026. What is the last day to file the 83(b) election?

• ADecember 4, 2026
• BApril 15, 2027, with the tax return
• CNo deadline applies until a share vests.
• DNovember 4, 2027