Guide

Cap tables and equity

83(b) elections

A 30-day election to tax restricted stock at grant instead of at vest — powerful at a tiny spread, irreversible if you forfeit.

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Section 83 times taxation of property transferred for services. 83(b) lets you elect to tax the property at receipt instead of at vesting.

Deadline: 30 days from the transfer (exercise or stock grant) — calendar days, not business days. Miss it and you cannot fix it. As of recent IRS practice, filing mechanics include Form 15620 / e-file options; confirm current instructions.

The big idea

If you receive shares subject to vesting, without 83(b) you generally include ordinary income as shares vest (FMV at each vest date minus anything paid). With a timely 83(b), you include income at grant/exercise on the spread then (often ~$0 if you paid FMV), and later appreciation is capital (and QSBS clocks may start).

NSO early exercise: 83(b) is often the point — lock tax at a tiny spread.

ISO early exercise: for regular tax, ISO treatment already defers ordinary income; practitioners still discuss 83(b) for AMT measurement on unvested shares (fixing AMT adjustment at exercise rather than at vest). This area is technical — do not DIY from a blog comment.

You generally cannot 83(b) an RSU — there is no property transferred until vest.

Warning

83(b) income is taxable even if you later forfeit the shares. Paying tax on $50k of value you never keep is the failure mode when people 83(b) a large spread and then quit.

Trade-off

File 83(b) when you early-exercise or receive restricted stock at a small or zero spread, you can afford the (small) tax, and you expect to vest. Skip or beware when the spread is large, cash is tight, or forfeiture risk is high. Never miss the 30-day window because you were "waiting for payroll to confirm."

Walking through a seed exercise

100,000 shares via early exercise, strike = 409A = $0.08, cost $8,000. File 83(b) within 30 days reporting ~$0 spread. Vest over 4 years. Sell after a QSBS holding period with eligible stock: federal exclusion may wipe most or all gain up to the cap. Risk: $8,000 and forfeiture if you leave early; shares illiquid.

Calendar the deadline the day you sign. File, keep proof of mailing or IRS receipt, and give a copy to the company. Founders buying stock at par use the same 30-day clock — see founder equity.

Common mistakes

  • Missing the 30 days. There is effectively no "oops" extension.
  • 83(b) on a large spread, then quitting — tax on value you never keep.
  • Trying to 83(b) RSUs. No property has transferred yet.

Check yourself

You early-exercise on June 1. The 83(b) window closes when?

June 30 — 30 calendar days, not business days.

You 83(b) a $50k spread, then leave before anything vests. Do you get the tax back?

No. The election taxed you at receipt. Forfeiture does not unwind that income.

Key takeaways

  • 83(b): 30 days; powerful for early exercise / restricted stock at low FMV.
  • You lock tax on the spread at grant; later growth is capital (and may start QSBS).
  • Forfeiture does not refund the tax.
  • RSUs cannot be 83(b)'d.

Further learning

IRS Topic 427: Stock optionsTopic No. 427 Stock Optionsirs.gov

Next, QSBS.

ISOs and AMT

Incentive stock options skip regular tax at exercise, but the spread is an AMT adjustment — and a qualifying sale needs two holding periods.

QSBS

Section 1202 can exclude a large fraction of federal gain on eligible C-corp stock — with different rules for shares issued before and after July 4, 2025.