Section 83(b) Election

A Section 83(b) Election is a filing with the IRS that allows a taxpayer who receives restricted stock (stock subject to a vesting schedule) to elect to be taxed on the full fair market value of the stock at the time of grant, rather than waiting to be taxed as the stock vests. This election must be filed within 30 days of receiving the stock—there are no extensions or exceptions. For early-stage founders who receive stock at a nominal value (e.g., $0.001 per share), the tax at the time of the election is negligible. Without the election, the founder would owe ordinary income tax on the much higher fair market value of each tranche as it vests, potentially creating a massive tax bill on illiquid stock. The election also starts the capital gains holding period and QSBS clock at the grant date rather than the vesting date.