Section 83(b) Election Calculator for Founders
A Section 83(b) election lets you pay ordinary tax on the value of restricted stock at grant rather than at vest — locking in basis when the stock is cheap. Calculate the tax savings for typical founder/early-employee grants over a 4-year vesting period.
| Shares Granted | — |
| FMV at Grant | — |
| FMV at Exit | — |
| Bargain Element at Grant | — |
| Ordinary Tax at 83(b) Filing | — |
| Ordinary Tax at Vest (No 83(b)) | — |
| Capital Gain on Exit | — |
| LTCG Tax With 83(b) | — |
| LTCG Tax Without 83(b) | — |
| Total Tax With 83(b) | — |
| Total Tax Without 83(b) | — |
| Lifetime Savings | — |
What Is the 83(b) Election
Section 83(b) of the Internal Revenue Code lets the recipient of restricted property (typically restricted stock or early-exercised stock options) elect to pay ordinary income tax at the time of grant rather than at each vest. The election locks in the basis at the grant-date FMV.
Most useful for founders and earliest employees, when the FMV at grant is very low (often $0.001 or less per share). Pay tax on essentially nothing at grant; all subsequent appreciation is LTCG when sold. Without 83(b), you'd pay ordinary income at each vest as FMV rises.
Source: irs.gov IRC §83(b) + IRS Pub 525
The 30-Day Deadline
The 83(b) election MUST be filed with the IRS within 30 days of grant. Late filings are not accepted — the right is lost forever. File via certified mail with return receipt to the IRS service center where you file your tax return. Keep a stamped copy and a copy in your records.
Also send a copy to your employer (they need it for payroll tax withholding) and attach a copy to your tax return for that year. Some employers use Carta or other equity platforms to automate this — verify your election was actually filed.
When 83(b) Wins
Founder shares granted at company formation (FMV $0.001 per share, $1,000 tax on 1M shares — minimal cost). Early employees with very low strike price. Early-exercised ISOs/NSOs in startup years.
Don't make the election when: FMV at grant is significant (you'd pay large upfront tax on the bargain), you're likely to leave before vesting (you can't get the tax back), or the company is high-risk and may fail.
Risk Considerations
If you leave the company before vesting, you forfeit the shares but cannot recover the tax you paid via 83(b). This is permanent loss. The election is a bet that the company succeeds AND you stay through vesting.
For typical founder shares ($0.001 FMV × 1M shares = $1,000 tax), the bet is reasonable — $1,000 loss for $10M+ potential exit tax savings. For mature pre-IPO grants with $5+ FMV per share, the 83(b) bet costs much more upfront and may not be worth it.