83(b) election calculator: file now or wait for vesting?
Restricted stock taxed at grant versus at vesting: the difference is usually the difference between capital gains and ordinary income on your entire upside.
Updated November 4, 2026 Sources and methodology
Federal income tax only. Ordinary income at grant is subject to payroll tax as well; capital gain is not.
How the comparison is built
With 83(b). You are taxed at grant on (FMV at grant − price paid) × shares. For founder stock priced at $0.0001 that is pennies. Your basis becomes the FMV at grant, and every dollar of later appreciation is a capital gain, long-term if you hold the shares more than a year from grant, which is almost always the case.
Without 83(b). Nothing happens until each tranche vests. At vesting you recognize (FMV at vest − price paid) as ordinary compensation income, and that amount is also your basis. The capital-gain clock only starts at vesting, so early appreciation is taxed at up to 37% federal instead of 20%.
How the math is assembled
| Item | With 83(b) | Without |
|---|---|---|
| Ordinary income | Spread at grant | Spread at vesting |
| Basis | FMV at grant | FMV at vesting |
| Capital gain | Sale − FMV at grant | Sale − FMV at vesting |
| LTCG clock starts | Grant date | Each vest date |
| If you leave early | Tax paid, stock forfeited | Nothing lost |
Worked example
100,000 founder shares at $0.001, granted when the 409A price is $0.01, vesting at $12 and sold at $40. Filing single with $150,000 of other income. The 83(b) election creates $900 of ordinary income and $216 of tax at grant; the $3.999 million of gain is long-term, taxed at $779,265. Without it, $1,199,900 is ordinary income at vesting ($424,729 at 37%) and the remaining $2.8 million is long-term gain ($560,000). Total federal tax comes to $779,481 against $984,729, a saving of $205,248 for a $216 check written early.
When to file the election
File the election when the current spread is small, the company is likely to survive, and you intend to stay long enough to hold the shares for a year after grant. Skip it when the spread is material, the stock is illiquid and speculative, or vesting is uncertain. The calculator shows the dollar difference; the risk of forfeiture is the part no spreadsheet captures.
Frequently asked
What does an 83(b) election actually do?
It makes you taxable at grant instead of at vesting. You include the difference between the price you paid and the fair market value at grant as ordinary income (usually close to zero for early-stage founder stock), and the capital-gain clock starts that day instead of at each vesting date.
How long do I have to file?
30 days from the grant or transfer date. There is no extension, no late filing relief, and the IRS does not have to acknowledge receipt. Missing the window by a day converts the entire future appreciation into ordinary income at vesting.
When is 83(b) a bad idea?
When the stock is expensive relative to its current value, when you might leave before vesting, or when the company is likely to fail. If you pay real tax on shares you never vest, the election cannot be undone: you lose the tax and keep no stock.
Sources. Code section 83(b) and Treas. Reg. 1.83-2 (30-day filing, no extensions). 2026 brackets and capital-gain thresholds: IRS Rev. Proc. 2025-32. The model assumes all shares vest and are sold in a single year and ignores the 3.8% net investment income tax and state tax.