What is a Section 83(b) Election?

A Section 83(b) Election is a tax election made by an individual who receives restricted stock as compensation for their work. It allows the individual to be taxed on the grant date rather than on the date the stock vests, causing the recognition of the individual’s ordinary income tax to accelerate. The acceleration will cause the individual to be taxed earlier, as opposed to the later vesting date. This is critically important, as value of the stock could increase over time, meaning the tax burden it carries would too. By choosing a Section 83(b) election, the individual could save a lot of money, especially if the value of stock.

The Section 83(b) Election also plays a crucial role in determining the holding period for capital gains treatment when the individual chooses to sell the stock. By choosing an 83(b) Election, the holding period begins on the grant date as opposed to the vesting date. This means that the holding period for the capital gain can begin sooner. This is important because long-term capital gains are usually taxed at lower rates than short-term gains, so the sooner the holding period begins, the better..

What Does 83(b) Elections Apply to?

Section 83(b) elections do not apply to all grants of stock. Rather, the elections only apply to stock granted in certain circumstances. The most common circumstances include: stock that is subject to a substantial risk of forfeiture and stock options where stock is subject to vesting. It is important to note that the stock must be granted for compensatory purposes, rather than for investments.  Stock subject to a substantial risk of forfeiture simply means that the stock is dependent upon performance of services. This typically appears when the stock is subject to a right of repurchase by the company that issued the shares. 

83(b) Elections: Should Founders File?

Being a founder of a start-up can be challenging. The last thing you are probably worried about is whether you need to file a Section 83(b) election the stock you received. However, in some circumstances, filing an 83(b) election can be one of the best decisions you make. In others, you may not need to file at all. Below, you will find the answer to the age-old question: Do I need to file an 83(b) Election? 

One of the most important questions facing founders of start-ups is: do I need to file a Section 83(b) election for the shares I received? The short answer is: it depends. Generally, a founder of a start-up who receives stock does not need to file an 83(b) election. This is because the stock is generally not given as compensation, rather it is treated as an investment in the company. Additionally, if your shares are not subject to vesting, you do not need to file, as 83(b) elections only apply to shares that have not vested yet. However, in certain circumstances a founder may need to file an 83(b) Election. These circumstances include shares being subject to vesting or received as compensation for your work. If you are a founder and have questions, we strongly recommend you talk to a tax professional about your specific circumstances. The sooner you do so, the better.

How Do I File? 

Filing a Section 83(b) is easy, but must be filed quickly. You only have thirty (30) days from the grant date to file the election with the Internal Revenue Service. In order to file you must: (1) fill out an 83(b) Election form; (2) mail the completed form to the IRS’s office where you file your return; and (3) keep a copy for your records. The 83(b) election form must contain information about you and information about the stock such as the date it was transferred, any restrictions, its fair market value, and the amount you paid for it. Once you have it filled out, you can send it to the IRS.

If you are unsure where the office you file your return is, you can consult the chart below.

If you live in… Mail to:

Alabama, Arkansas, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Missouri, New Hampshire, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Wisconsin


Department of the Treasury Internal Revenue Service Kansas City, MO 64999-0002
Arizona, Florida, Louisiana, Mississippi, New Mexico, Texas

Department of the Treasury Internal Revenue Service Austin, TX 73301-0002


Alaska, California, Colorado, Hawaii, Idaho, Kansas, Michigan, Montana, Nebraska, Nevada, North Dakota, Ohio, Oregon, South Dakota, Utah, Washington, Wyoming Department of the Treasury Internal Revenue Service Ogden, UT 84201-0002

A foreign country, U.S. possession or territory, or use an APO or FPO address, or file Form 2555 or 4563, or are a dual-status alien.


Department of the Treasury Internal Revenue Service Austin, TX 73301-0215