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

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 an early employee has access to. It’s also brutally unforgiving. The deadline sits exactly 30 days from your grant or exercise date, and there are no extensions, no exceptions, no late filing even by a single day.

What an 83(b) election actually does

Normally, restricted stock subject to vesting gets taxed as ordinary income each time a chunk vests, based on that day’s fair market value. That’s the same mechanic behind RSU taxation. An 83(b) election flips this around. It lets you elect to be taxed on the entire grant’s value right now, at the typically low fair-market-value of early-stage equity, instead of paying tax bit by bit as the stock (hopefully) appreciates and vests over the following years.

For a founder or very early employee getting restricted stock while the company’s worth next to nothing, that can mean paying tax on a few hundred dollars of value today rather than a much bigger number years from now, once 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, so it’s worth stating plainly: RSUs are not eligible for an 83(b) election. An RSU is a promise to deliver stock later. Nothing actually transfers to you at grant, so there’s nothing for the election to attach to. It only works for restricted stock (or restricted stock awards) you actually receive and could lose, and for 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

Under Treasury Regulation §1.83-2(b), the election has to reach the IRS no later than 30 calendar days after the date the property was transferred to you. Not 30 days from your offer letter, and not 30 days from when your accountant gets around to it. Courts have consistently declined to grant relief for late filings, no matter the reason for the delay. The IRS introduced a standardized Form 15620 for this election, filed by mail or, following a 2025 update, through an electronic portal. The 30-day window applies identically either way.

One practical trap worth knowing about: a 2025 change to USPS mail-processing rules means a paper election dropped in a mailbox on day 30 isn’t guaranteed to get postmarked that day anymore. Mail now gets postmarked when it’s processed at a USPS facility rather than when it’s deposited. Filing several days ahead of the deadline, or using the electronic portal, sidesteps this entirely.

Worked example: the tax difference

Say you join an early-stage startup as an H1B-sponsored employee and get 40,000 shares of restricted stock on 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 as shares vest over the next four years, no matter how much the stock appreciates.
• The long-term capital gains holding period starts immediately, from the election date.

Without the election (default treatment):

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

The election trades a small, known, current tax cost for avoiding a much larger, uncertain, future one. But it’s a real bet: if the company fails and the stock becomes worthless, the $2,000 already paid isn’t coming back.

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

An 83(b) election is a wager that the company succeeds. Leave before fully vesting, or watch the company fail and your unvested shares get forfeited, and you generally can’t recover the tax already paid on the election. There’s no refund mechanism for tax paid on shares you never actually kept. That’s what makes this a genuine decision rather than an automatic “always file it” move, especially at a very early, unproven company.

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

Filing itself doesn’t change based on immigration status. What does matter for an H1B or green card holder is that startup equity often comes with below-market cash salary, and H1B sponsorship at an early-stage company carries its own risk if the startup runs out of funding before your green card process wraps up. Weigh the 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.