Equity compensation · Section 83(b)
An 83(b) election taxes restricted stock up front, so later growth is taxed as capital gain.
With a Section 83(b) election, your ordinary income is the restricted shares’ fair market value when you receive them, minus what you paid. Without the election, each block of shares is taxed when it vests, on its value then minus what you paid. You must file within 30 days of receiving the shares.
Updated · Sources
Federal 83(b) rules for 2026
- 30 days
- is the whole window, with no extensions. If day 30 is a weekend or legal holiday, the next business day counts.
- $0
- is your income at the transfer if you paid the shares’ full fair market value.
- 1 year
- and a day from the transfer makes your gain on a sale long-term with an 83(b). Without the election, the clock starts at vesting.
The One Big Beautiful Bill Act did not change Section 83. No 83(b) rule is indexed for inflation, so these rules are the same as in 2025.
Can you file an 83(b) election?
Your stock must pass the first three tests, or there is nothing to elect. The last two cover how you file, and a late election does not count.
Stock you receive for your work
The election covers stock you get in connection with your work, as an employee, founder or contractor. It applies even when you pay full value for the shares.
Shares that have not vested
The shares must carry a substantial risk of forfeiture. That means you can lose them until you meet a condition, such as staying a set time. For example, the company can buy them back at cost if you leave early. Shares that are already vested are taxed when you receive them, so there is nothing to elect.
Shares, not RSUs or an option
An RSU is only a promise of shares later, and the tax code bars an 83(b) election on it. An option grant does not transfer any shares either. If your plan allows early exercise, you can elect on the unvested shares you receive.
Filed within 30 days of the transfer
Day 1 is the day after the shares are transferred to you. For an early exercise, the transfer is the exercise itself. For shares transferred on March 2, 2026, the last day is April 1, 2026.
Sent to the IRS, with a copy to your company
You can file Form 15620 online, or mail the form or a signed statement to the IRS office where you file your return. Either one must include what the regulations list, such as your taxpayer ID, the transfer date, the shares’ value and your price. Give your company a copy.
A Section 83(i) election is a different choice, for some private-company employees with options or RSUs. It defers income tax on their shares, and it cannot be made on shares covered by an 83(b).
What an 83(b) election saves on restricted stock.
An 83(b) pays off when the tax at the transfer is small and the shares grow before they vest.
No 83(b) election
$315,750
The $500,000 rise before vesting is taxed as wages, even if you cannot sell yet. The $500,000 gain after vesting is long-term.
83(b) election filed
$238,000
Nothing is taxed at the transfer, since you paid full value. The whole $1,000,000 gain is long-term.
Election filed, then you leave
$0
You forfeit the shares before they vest, and the company buys them back for the $10,000 you paid. You have no gain or loss.
These figures use top 2026 federal rates, for a single filer whose salary alone already puts them past $640,600 of taxable income. Wages are taxed at 37%, plus 1.45% Medicare and the 0.9% Additional Medicare Tax. At that salary, no Social Security tax is added. Long-term gain is taxed at 20% plus the 3.8% net investment income tax. You sell more than a year after vesting, so the later gain is long-term either way. Without the election, $196,750 is due in the vesting year and $119,000 at sale. State tax is separate.
An 83(b) for ISOs changes only your AMT.
The spread is the shares’ value minus your exercise price. An 83(b) on NSO shares moves the tax on the spread from each vesting date to the exercise. On ISO shares, it moves only the alternative minimum tax (AMT), and your regular tax is the same with or without it.
| NSO shares | ISO shares | |
|---|---|---|
| With an 83(b) | Spread taxed as ordinary income at exercise | Spread counts for the AMT at exercise |
| Without one | Spread taxed as ordinary income at each vesting | Spread counts for the AMT at each vesting |
| Payroll tax on the spread | Yes, for employees | None |
| Holding period starts | At exercise, with an 83(b) At vesting without one | At exercise, for the 1-year ISO test With or without an 83(b) |
With an 83(b), the spread is zero if your exercise price equals the shares’ fair market value. If you sell ISO shares within two years of grant or one year of exercise, the election does not change your regular tax. Your ordinary income is measured at vesting, and your capital gain clock starts then.
The 83(b) traps founders and early employees fall into.
Forfeiting does not refund the tax
If you leave and forfeit unvested shares, there is no deduction for the income you already reported. Your only loss is what you paid minus what you get back, as a capital loss.
The election is hard to undo
Within the 30 days, the IRS generally grants a request to revoke. After that, it consents only for a mistake of fact about the transaction, requested within 60 days of finding it. A drop in the stock’s value is not one. Each request carries a 2026 IRS user fee of $3,450 to $43,700, depending on your income.
One election covers one transfer
Each transfer of shares starts its own 30 days. If you early exercise in three batches, you need three elections.
The value ignores the vesting schedule
You report the shares at their full fair market value on the transfer date. Vesting conditions are ignored, because they will lapse. Only a restriction that never lapses, such as a permanent formula price, can set a different value.
No proof the IRS received it
A mailed election counts as filed on its postmark date, but only if it arrives. Certified or registered mail, or an IRS-designated delivery service, is your proof. Keep a copy, since you no longer attach one to your return.
Skipping it delays the QSBS clock
For restricted stock, the QSBS holding period starts at vesting unless you file an 83(b). With the election it starts at the transfer, so the five years for a full exclusion begin sooner.
83(b) planning before the 30 days run out.
Valim’s CPAs help founders and early employees with 83(b) elections, and file the returns that follow. Send us your stock agreement early in the 30 days, so there is time to decide.
- We confirm your shares can take an 83(b) election.
- We model the tax now and later, with and without the election, from your price, today’s value and your vesting schedule.
- We draft the statement or Form 15620 for you to sign, and check its dates and values.
- We plan early exercises around the AMT on ISOs and the ordinary income on NSOs.
- We track your basis and holding period, including for QSBS, and report the sale on Form 8949.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
83(b) election questions.
What is an 83(b) election?
An 83(b) election lets you pay tax on restricted stock when you receive it, instead of when it vests. You report the shares’ fair market value on the transfer date, minus what you paid, as ordinary income. If you paid full value, that income is zero. Growth after that is capital gain when you sell, and your holding period starts at the transfer. If you later forfeit the shares, you cannot deduct the income you reported.
When is the 83(b) deadline?
The 83(b) deadline is 30 days after the shares are transferred to you. For restricted stock, the transfer is usually the grant or purchase date. For an early exercise, it is the exercise date, never the option grant date. If the 30th day is a Saturday, Sunday or legal holiday, the next business day counts. The IRS cannot extend the deadline.
Is there a new IRS form for the 83(b) election?
Yes, the IRS form for an 83(b) election is Form 15620, Section 83(b) Election, which first appeared in late 2024. Its current revision is dated April 2025. Using it is optional, because a signed statement with the details the regulations require still works. Since mid-2025, you can also submit Form 15620 online through an IRS Online Account instead of mailing it.
Should I file an 83(b) if I early exercise?
Usually yes, because an 83(b) filed after an early exercise costs little or no tax when the spread at exercise is small. The spread is the shares’ fair market value minus your exercise price. With NSOs, an 83(b) filed within 30 days taxes the spread at exercise instead of at each vesting date. With ISOs, it affects only the alternative minimum tax (AMT), which then measures the spread at exercise. Any tax you pay up front is not refunded if you leave and forfeit the shares.
What happens if I miss the 83(b) deadline?
If you miss the 83(b) deadline, you cannot file late, and the IRS cannot extend the 30 days set by the tax code. Instead, each block of shares is taxed as ordinary income when it vests, on its value then minus what you paid. Its capital gain holding period also starts at vesting. For ISO shares, the alternative minimum tax adjustment moves to each vesting date. Cancelling and reissuing the shares may start a new 30 days, but have a CPA review that first.
Sources
- 26 U.S.C. § 83, Property transferred in connection with performance of services
- 26 C.F.R. § 1.83-2, Election to include in gross income in year of transfer
- 26 C.F.R. § 1.83-3, Meaning and use of certain terms
- IRS, Form 15620, Section 83(b) Election (Rev. April 2025)
- IRS, Mobile-friendly forms (Form 15620 online)
- IRS, Rev. Proc. 2012-29 (Internal Revenue Bulletin 2012-28)
- T.D. 9779, Section 83(b) elections (81 FR 48707, July 26, 2016)
- IRS, Rev. Proc. 2006-31 (Internal Revenue Bulletin 2006-27)
- IRS, Rev. Proc. 2026-1 (Internal Revenue Bulletin 2026-1), user fees
- 26 C.F.R. § 1.422-1, Incentive stock options, general rules
- IRS, Instructions for Form 6251 (2025)
- 26 U.S.C. § 7502, Timely mailing treated as timely filing and paying
- 26 U.S.C. § 7503, Time for performance when the last day falls on a weekend or holiday
- 26 C.F.R. § 1.83-4, Special rules (holding period and basis)
- 26 C.F.R. § 1.83-7, Taxation of nonqualified stock options
- 26 U.S.C. § 1222, Short-term and long-term capital gains
- 26 U.S.C. § 1202, Partial exclusion for gain from certain small business stock
- IRS, Rev. Proc. 2025-32, 2026 inflation adjustments
- 26 U.S.C. § 1411, Net investment income tax
- 26 U.S.C. § 3101, Social Security and Medicare tax on employees
- IRS, Publication 15 (2026)
Reviewed and updated September 2026. General information, not advice for your situation.