Section 83(b) Election Tax Savings 2027 Calculator
Compare paying ordinary income tax now (83(b) election) vs ordinary tax later at higher value for restricted stock or founder equity in 2027.
What Is a Section 83(b) Election?
When you receive restricted stock subject to vesting, you can elect under IRC §83(b) to recognize income at GRANT (when value is low) instead of at VESTING (when value is high). The election locks in ordinary income on today's FMV minus what you paid; all future appreciation becomes long-term capital gain on sale. Critical deadline: must be filed within 30 days of grant — no exceptions. Source: IRC §83(b), Treas. Reg. §1.83-2. Last updated: May 2026.
When 83(b) Wins Big
Founders at grant: stock often has $0.001-$0.10 FMV → tax cost is pennies. Without 83(b), ordinary income at each vesting tranche could be $50K-$500K+ per tranche when company is valued. The $5 you save in ordinary tax at grant + the LTCG rate (20% + NIIT) vs ordinary rate (37% + NIIT) on $1M+ exit can mean $200K-$500K in tax savings.
Risk: Quit Before Vesting
If you leave the company before fully vesting, you forfeit unvested shares — but the 83(b) tax you already paid is NOT refundable. This is the main downside. For founders confident in their commitment, 83(b) is almost always correct. For non-founder employees with significant doubt about staying, the calculus is closer.
How to File the 83(b)
Mail signed election to the IRS service center where you file taxes, postmarked within 30 DAYS of grant (not 30 business days — calendar days). Use certified mail with return receipt. Provide a copy to your employer (especially important for S corp / LLC equity). Include a copy with your tax return for the grant year. Many founders miss the 30-day deadline and lose this strategy.