83(b) Election Guide for Founders
Written by Aparna Devalla
Curated by Rubric Financial
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What an 83(b) Election Is
- An 83(b) election is a filing with the IRS that allows you to pay income tax on the fair market value of restricted stock at the time of grant, rather than as it vests.
- Under IRC Section 83, restricted stock is normally taxed as ordinary income at each vesting event based on the stock's fair market value at that time.
- By filing an 83(b), you elect to recognize all taxable income upfront, typically when the stock value is at its lowest (often near zero for early-stage startups).
- This election is most commonly used by founders who receive restricted stock subject to a vesting schedule at or near the time of incorporation.
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About the author
Aparna DevallaCPAHead of Tax & Accounting
CPA and Head of Tax & Accounting at StartupCFO. Specializes in multi-state tax compliance, R&D credits, and GAAP-compliant books for venture-backed startups.
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IRS filing within 30 days of receiving restricted stock that elects to pay tax upfront at the (low) grant FMV rather than at vesting.
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