83(b) Election Explained: The 30-Day Tax Deadline on Early-Exercised Options

An 83(b) election is a filing with the IRS that lets you pay income tax on restricted stock or early-exercised stock options at today's value, instead of paying tax again every time a batch vests later. You have exactly 30 days from the date you receive the stock to file it, the deadline cannot be extended, and once filed it cannot be undone. If your offer includes the right to exercise unvested options early, this clause decides whether that right saves you money or creates a tax bill with no exit.

What Is an 83(b) Election?

Section 83(b) of the Internal Revenue Code lets you choose when restricted property, here, company stock you haven't fully earned yet, gets taxed. Normally the IRS taxes restricted stock as it vests, using the stock's value on each vesting date. An 83(b) election flips that: you pay income tax once, upfront, on the value at the time you receive the shares, and any growth afterward is taxed later as a capital gain instead of ordinary income.

The 30-Day Clock Starts When You Receive the Stock

The filing window is 30 calendar days from the date you receive the restricted stock, not 30 business days, and it includes weekends and holidays. For an early-exercised option, that's your exercise date. The IRS does not grant extensions under any circumstances, according to tax commentary from BDO and Lathrop GPM covering the IRS's recent changes to the filing process (BDO, Lathrop GPM).

"Restricted Stock" Is the Key Phrase

The election only applies to stock subject to a "substantial risk of forfeiture," meaning the company can take it back if you leave before it vests. That covers early-exercised options and founder or early-employee restricted stock. It generally doesn't cover a grant you haven't exercised at all, or RSUs, since you don't own shares in either case yet.

Who Can Actually File One?

Only two situations in a typical offer letter create 83(b) eligibility: early-exercised stock options and direct grants of restricted stock.

Early-Exercised ISOs and NSOs

Some option grants let you exercise unvested options immediately after you're hired, before they've vested, in exchange for the right to file an 83(b) election. If the spread between strike price and current fair market value is small or zero at that point, often true for a brand-new grant, the tax due on the election can be close to nothing. We cover the exercise side separately in our guide to stock option strike prices.

Why Vested Options and RSUs Don't Qualify

If your options have already vested, or your grant is RSUs rather than options, there's no 83(b) decision to make. Vested options are exercised whenever you choose, with ordinary tax rules applying at exercise. RSUs convert straight to shares and ordinary income at vesting with no election available, a distinction covered in our RSU vesting and phantom stock vs. RSU posts.

How an 83(b) Election Changes Your Tax Bill

The decision comes down to when you want to be taxed, and on how much value.

Without the Election: Taxed Again at Every Vesting Date

If you don't file, each tranche of early-exercised stock is taxed as it vests, using the stock's fair market value on that future date, not the value when you exercised. If the company's 409A valuation has climbed since, you owe ordinary income tax, and for ISOs a potential AMT hit, on the full appreciation, even though you already paid cash to exercise. We cover that exposure in AMT on ISO exercise.

With the Election: One Tax Event, Then Capital Gains

File the election and you're taxed once, immediately, on the spread between strike price and fair market value at exercise. If that spread is near zero, the tax owed is near zero. Everything the stock gains afterward is taxed later as a capital gain when you sell, typically at a lower rate than ordinary income once you've held the shares over a year.

Where ISOs and AMT Fit In

For early-exercised ISOs, filing an 83(b) also starts your holding-period clock immediately. Favorable long-term capital gains treatment on an ISO generally requires holding the shares at least two years from grant and one year from exercise; missing either triggers a disqualifying disposition, taxed partly as ordinary income instead.

How to File Form 15620

For years there was no official IRS form for this election, just a model letter from Rev. Proc. 2012-29 that filers adapted themselves.

What Changed With Form 15620

The IRS released Form 15620 on November 7, 2024, giving filers an official, standardized form for the first time, according to BDO's coverage of the release (BDO). It replaces the homemade letters most people used previously, though BDO noted it remained unclear at release whether using it would become mandatory or the older letter format would still be accepted.

Mail It, Keep Proof, and Give Copies to the Right People

File by mailing the signed form to the IRS service center where you'd file your tax return, within the 30-day window, and send it by certified mail with a return receipt so you have dated proof if the filing is ever questioned. Then give a copy to your employer for its own records, and attach a copy to your federal income tax return for the year of the election. Skipping either copy doesn't void the election, but it creates a paperwork gap that's hard to untangle years later.

The Real Risk: What Happens If You Forfeit

The 83(b) election is a bet that the stock is worth holding, and it isn't refundable if that bet is wrong.

You Can't Get the Tax Back

If you pay tax on the election and then leave before the remaining shares vest, or the company fails and the stock becomes worthless, the tax you already paid is gone. There's no mechanism to claim it back or deduct the loss against ordinary income. This is the core tradeoff: a small, known cost now against an unknown, unrecoverable one if things don't work out.

When Filing Doesn't Make Sense

If the spread between strike price and current fair market value is already large, the upfront tax bill from filing can be substantial, and you'd be paying real money for stock in a company you've barely started at. In that case, the math may favor not early-exercising at all, or exercising gradually as vesting actually occurs. This also varies by your personal tax situation, filing status, and state, so it's not a one-size answer.

Should You File on a New Job Offer?

If your offer letter includes early-exercise rights, this isn't a clause to leave for later. The 30-day window starts the moment you exercise, which may be your first week on the job.

When It Usually Makes Sense

Filing tends to make the most sense when you're exercising immediately after a fresh grant, the spread between strike price and fair market value is small, and you're reasonably confident you'll stay long enough for the shares to vest. Because the election is irreversible and the deadline is fixed, confirm the numbers with a tax professional who can see your actual situation, not a general guide; state tax treatment and your other income for the year both change the answer.

Frequently Asked Questions

Can I file an 83(b) election on RSUs?

No. RSUs aren't property you own until they vest, so there's nothing to elect on early. The election only applies to restricted stock you've actually received, such as early-exercised options or direct restricted stock grants.

What happens if I miss the 30-day deadline?

The election is lost for that grant, with no extension and no late-filing exception. You're taxed under the default rule instead, meaning tax is assessed again at each future vesting date using the stock's value on that date.

Do I need a lawyer or accountant to file Form 15620?

It isn't required, but given the deadline is absolute and the election can't be reversed, having a tax professional confirm the numbers and the mailing is common practice, especially for a first-time startup hire unfamiliar with the process.

Is an 83(b) election the same thing as early exercising?

No. Early exercising is paying to convert unvested options into shares before they vest. The 83(b) election is the separate filing you make after that exercise to lock in today's value for tax purposes. You can early-exercise without filing the election, but then you lose the main benefit of doing it, and the difference shows up most for ISOs versus NSOs, covered in our ISO vs. NSO guide.

Key Takeaways

• An 83(b) election lets you pay tax once, upfront, on early-exercised options or restricted stock, instead of being taxed again at every future vesting date.
• The filing deadline is 30 calendar days from the date you receive the stock, with no extensions and no exceptions.
• The election is irrevocable: if you forfeit the shares or the company fails, the tax you already paid isn't refunded.
• As of November 2024, the IRS offers an official Form 15620 for this filing, replacing the self-drafted letters filers used before.
• This only applies to early-exercised options or restricted stock; vested options and RSUs don't have an 83(b) decision to make.

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