Section 83(b) election

A Section 83(b) election is a tax election made within 30 days of receiving restricted stock or a profits interest. By electing, you choose to include the value of the equity in income at grant rather than at vest. This can lock in a low taxable value early — and start the QSBS holding clock immediately.

When it makes sense

The 83(b) is most valuable when:

• The current fair-market value is low (e.g., founder common at incorporation, restricted stock from a seed-stage startup)
• You expect significant appreciation before vesting completes
• You want to start the long-term capital gain holding period (and the QSBS Section 1202 clock) from grant rather than vest

When to NOT file

If the equity is unlikely to vest (e.g., you might leave the company) and you've already paid tax under the election, you generally cannot recover that tax. Companies in financial distress where the equity may end up worthless are obvious cases to skip.

How to file

You file a paper letter with the IRS office where you file your individual return, plus a copy to your employer, within 30 days of grant. Late filings are not allowed; there is no extension. The IRS no longer requires a copy to be attached to the return, but companies typically retain copies.

Coordination with QSBS

If the stock is QSBS-eligible, an 83(b) election starts the 5-year holding period at grant rather than at vest. For founders who incorporate, get common, and file 83(b) on day 1, this is generally automatic — but missing the 30-day window has cost many founders the QSBS benefit.