Section 83(b) Election: What It Is and How to File

The Section 83(b) election is one of the most important tax decisions a startup founder can make. Filing it correctly — and on time — can save you tens of thousands of dollars in taxes.

What Is a Section 83(b) Election?

When you receive shares in a company that are subject to vesting, the IRS normally taxes you on the value of those shares as they vest (when their value could be much higher). A Section 83(b) election allows you to elect to be taxed at the time of grant instead — typically when the shares are worth very little.

Why It Matters for Founders

Example scenario:

• You receive 1,000,000 founder shares subject to 4-year vesting
• At grant, shares are worth $0.001 each = $1,000 total value
• After 2 years, shares are worth $2.00 each
• Without 83(b): You’d be taxed on the $2,000,000 in value as shares vest
• With 83(b): You’re taxed only on the initial $1,000 — a massive difference

The 30-Day Deadline Is Critical

You must file the 83(b) election with the IRS within 30 days of the share grant/purchase date. This deadline is absolute — there are no extensions.

Missing the deadline means you permanently lose the ability to make this election.

Who Should File an 83(b) Election?

You should file if:

• You received shares that are subject to a vesting schedule
• You believe the value of your shares will increase significantly over time
• You are a founder or early employee receiving equity compensation

You do not need to file if your shares are fully vested at the time of purchase (no vesting restrictions apply).

How to File the 83(b) Election

Step 1: Prepare the 83(b) Election Letter

The letter must include:

• Your name, address, and taxpayer ID (SSN or ITIN)
• Description of the property (shares)
• Date of transfer and taxable year
• Nature of vesting restrictions
• Fair market value at time of transfer
• Amount paid for the shares
• Statement that a copy is being provided to your employer/company

Step 2: Sign and Date the Letter

Sign and date the election letter on or before the grant date (or within 30 days of it).

Step 3: Mail to the IRS

• Send the original election to the IRS Service Center where you file your taxes
• Send by certified mail with return receipt to create a record of the mailing date
• Keep a copy for your personal records
• Provide a copy to the company

Step 4: Attach a Copy to Your Tax Return

Attach a copy of the 83(b) election to your federal income tax return for the year the property was transferred.

Common Questions

Do I need to pay tax when I file the 83(b)?

You’ll owe ordinary income tax on the value of the shares at the time of grant. For most founders with low-value shares at incorporation, this amount is minimal.

What if I’m a non-US founder?

Non-US founders may also benefit from filing an 83(b) election if they have US tax obligations. Consult a tax professional familiar with US and your home country’s tax treaties.

Can EasyFiling help?

Yes. EasyFiling can help you prepare and understand your equity documentation as part of your company formation package. Learn more here.

Updated on: 21/02/2026