Section 83(b) Election

## Section 83(b) Election

An 83(b) election is a tax election filed with the IRS within 30 days of receiving restricted stock (not RSUs). It lets you pay income tax on the stock's value at grant rather than at vesting.

### When It Saves Money

| Scenario | Without 83(b) | With 83(b) |
|----------|---------------|------------|
| Grant value | $10,000 | $10,000 |
| Value at vest (4yr later) | $500,000 | $500,000 |
| Ordinary income tax on | $500,000 | $10,000 |
| Subsequent gain | Short-term CG | Long-term CG |

By filing 83(b), you pay ordinary income tax on $10,000 instead of $500,000. The $490,000 appreciation is taxed at the lower long-term capital gains rate.

### Critical Rules

- **30-day deadline**: Must file within 30 days of grant. No exceptions, no extensions.
- **Applies to restricted stock only**: Not RSUs (you don't own the stock at grant).
- **Risk**: If you leave before vesting and forfeit the stock, you cannot recover the tax already paid.
- **Filing**: Mail to IRS with your tax return. Keep proof of mailing.

### Best For

Early-stage startup employees receiving stock with very low fair market value. The tax at grant is minimal, and if the company succeeds, the savings are enormous.