Section 83(b) Election: The 30-Day Deadline and How to File

If you receive stock for your work and could lose it by leaving the company, the tax normally arrives when the stock vests, based on what it is worth then. A Section 83(b) election lets you choose to be taxed at the time of transfer instead, on the value then minus what you paid. For founders who buy restricted shares at a low price, that can mean little or no tax now and capital gain treatment later. The catch is a deadline of only 30 days, which cannot be extended.

What the election changes

Without an election, restricted stock is not taxed until it is substantially vested, meaning it is transferable or no longer subject to a substantial risk of forfeiture. At that point you include its fair market value, minus anything you paid, as compensation. Your holding period for capital gains starts at vesting. Dividends paid before vesting are treated as compensation.

With an election, you include the value at transfer, minus what you paid, in income for the year of transfer. Later appreciation is generally not compensation. Your basis is what you paid plus what you included in income, and your holding period generally starts at transfer. Dividends are treated as ordinary dividends.

If you later forfeit the stock, your loss is limited to the amount you paid minus anything you receive back. You do not get a deduction for income you already included.

Example (hypothetical): A founder buys 1,000,000 restricted shares for $0.01 each ($10,000) on March 2, 2026, vesting monthly over four years. The shares are worth $0.01, so an election reports $0 of income. The deadline is April 1, 2026. Without it, if 250,000 shares vest when worth $2.00 each, the founder has about $497,500 of ordinary income at vesting ($1.99 times 250,000), probably with no cash to pay the tax. With it, there is no compensation income at vesting, and gain on a sale is generally capital gain.

When it can make sense, and the risks

The election tends to fit when the value at transfer is close to the price you pay, so the election costs little or no tax. Founders buying shares at formation often fit that pattern. Starting the holding period early can also matter for qualified small business stock.

The risks are real:

• If the value exceeds your price, you owe tax now on stock you may never own.
• If you forfeit the stock or its value falls, you generally cannot recover the tax you paid on the income.
• The election does not erase tax. It changes timing and character.

If your plan lets you exercise options early for unvested shares, the shares you receive can be restricted property, and an election within 30 days of exercise may apply. Early exercise of incentive stock options also has alternative minimum tax effects, so get advice first. See stock options, ISOs, NSOs and RSUs.

How to file

1. Confirm the transfer date. This is the date you receive the stock or buy it subject to the restrictions, not the vesting date.
2. Determine fair market value at transfer, ignoring restrictions that will lapse. For a private company, ask for the company's valuation and review it with your CPA.
3. Complete Form 15620 or a written statement. It must be signed and include your name, address and taxpayer identification number, a description of the property, the transfer date and tax year, the restrictions, the fair market value, the amount you paid and a statement that you have given copies to the required persons. Form 15620 is optional; the statement is also valid.
4. Mail it to the IRS office where you file your return. Use a method that proves the mailing date, such as certified mail.
5. Give a copy to the company and, if someone other than you receives the property, to that person.
6. Keep proof of mailing, the filed election and the valuation with your stock records.

Common mistakes

• Missing the 30-day deadline. It runs from the transfer date, not from the grant, board approval or vesting date.
• Relying on the company, attorney or a platform to file without confirming it was mailed.
• Filing for stock options or RSUs, which do not work this way.
• Using the wrong value or leaving out what you paid.
• Forgetting to give the company a copy.
• Making the election when the stock is already fully vested, which is unnecessary.
• Not telling your CPA, then missing the income or basis on your return.

How we can help

We can review your grant documents, estimate the tax at transfer, complete Form 15620 and keep records for later basis and QSBS reporting. If you are a founder, we can coordinate with your startup attorney. See equity planning and management, startups and founders and capital gains and losses.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.