83(b) Elections for Startup Equity: What to Know

If you’ve received restricted stock or early-exercised stock options at a startup — as opposed to standard RSUs — an 83(b) election under Internal Revenue Code Section 83(b) can be one of the highest-leverage tax moves available to an early employee. It’s also one of the most unforgiving: the deadline is exactly 30 days from your grant or exercise date, with no extensions, no exceptions, and no path to file late even for a single day.

What an 83(b) election actually does

Normally, restricted stock subject to vesting is taxed as ordinary income each time a portion vests, based on that day’s fair market value — the same mechanic that governs RSUs. An 83(b) election changes this: it lets you elect to be taxed on the entire grant’s value now, at the low fair-market-value typical of early-stage equity, rather than paying tax incrementally as the stock (hopefully) appreciates and vests over the following years.

For a founder or very early employee receiving restricted stock when the company is worth almost nothing, this can mean paying tax on a few hundred dollars of value today instead of tax on a much larger number down the road, when the same shares have appreciated and vest at a higher price.

Important: this doesn’t apply to standard RSUs

This is the single most common point of confusion. RSUs are not eligible for an 83(b) election. An RSU is a promise to deliver stock in the future — no property actually transfers to you at grant, so there’s nothing to elect against. The election only applies to restricted stock (or restricted stock awards) that you actually receive and could lose, and to shares from an early-exercised stock option, where you’ve paid the exercise price and hold real, forfeitable shares before they vest.

The 30-day deadline, with no exceptions

Per Treasury Regulation §1.83-2(b), the election must be filed with the IRS no later than 30 calendar days after the date the property was transferred to you — not 30 days from when you signed your offer letter, not 30 days from when your accountant reviews the paperwork. Courts have consistently declined to grant relief for late filings, regardless of the reason for the delay. The IRS introduced a standardized Form 15620 for this election, filed by mail or, as of a 2025 update, through an electronic portal — but the 30-day window applies identically either way.

A practical trap worth noting: under a 2025 change to USPS mail-processing rules, a paper election dropped in a mailbox on day 30 is no longer guaranteed to be postmarked that day, since mail is now postmarked when processed at a USPS facility rather than when deposited. Filing several days before the deadline, or using the electronic portal, removes this risk entirely.

Worked example: the tax difference

Suppose you join an early-stage startup as an H1B-sponsored employee and receive 40,000 shares of restricted stock, subject to a standard four-year vesting schedule, at a time when the company’s common stock is valued at $0.05/share.

With an 83(b) election filed within 30 days:

• Taxable income recognized now: 40,000 × $0.05 = $2,000, taxed as ordinary income today
• No further ordinary income tax owed as shares vest over the next four years, regardless of how much the stock appreciates
• The holding period for long-term capital gains starts immediately, from the election date

Without the election (default treatment):

• Say the company grows and the stock is worth $3.00/share by the time the last quarter vests
• Ordinary income is recognized on each vesting tranche’s fair market value at that time — on the final quarter alone (10,000 shares), that’s 10,000 × $3.00 = $30,000 of ordinary income for that one vesting event

The election converts a small, known, current tax cost into avoiding a much larger, uncertain, future one — but it comes with real risk: if the company fails and the stock becomes worthless, the $2,000 already paid in tax is not recoverable.

The risk that makes this a real decision, not a formality

An 83(b) election is a bet that the company will succeed. If you leave before fully vesting, or the company fails and your unvested shares are forfeited, you generally cannot recover the tax you already paid on the election — there’s no mechanism to claim a refund for tax paid on shares you never ended up keeping. This is the tradeoff that makes the election a genuine decision rather than an automatic “always file it” move, particularly for someone joining a very early, unproven company.

No visa-specific mechanics — but real visa-specific stakes

The filing process itself doesn’t change based on immigration status. What does matter for an H1B or green card holder specifically: startup equity compensation often comes with below-market cash salary, and an H1B sponsorship at an early-stage company carries its own risk if the startup runs out of funding before your green card process completes. Weigh an 83(b) election’s upfront tax cost against that broader risk picture, not just against the stock’s potential upside.

Sources: 26 U.S.C. § 83(b); Treasury Regulation § 1.83-2(b); IRS Form 15620 instructions.