83(b) Election: A Guide for Founders (2026)

You incorporated your company, issued yourself four million shares at a fraction of a penny each and started setting up the details that shape your cap table from day one. One of those details is an 83(b) election, a filing with a 30-day window that can have lasting tax consequences for founders. This article covers what the election does, how to file it in 2026, the real tax savings at stake and the mistakes that trip founders up most often.

What an 83(b) Election Actually Does

The 83(b) election is a written notice you send to the Internal Revenue Service (IRS) within 30 days of receiving restricted stock. It tells the IRS to tax you on the stock's value right now, at the moment of transfer, rather than later when your shares vest. For founders receiving shares at incorporation, the stock is worth almost nothing, which means the tax bill today is close to zero.

The Default Tax Rule You're Overriding

Under IRC §83(a), each vesting event becomes a separate taxable moment, with ordinary income tax on the fair market value of shares as they vest. For a founder on a standard four-year vesting schedule, this creates four separate tax bills at whatever the company happens to be worth on each future date. 

Shares worth fractions of a penny at incorporation could be worth dollars per share by the time they vest, and you'd owe ordinary income tax on that appreciation while the shares remain private and unsellable. There is no way to fund the tax bill from the asset itself, which is why filing early is often treated as a core step. That mismatch between tax liability and liquidity makes the default rule especially punishing for founders of high-growth companies.

How the Election Changes Your Tax Treatment

An 83(b) election can shift what would otherwise be taxed as ordinary income into gain recognized later on sale. When you file the election at grant, you pay ordinary income tax on the stock's current value, often near zero for founders. All future appreciation then qualifies for long-term capital gains treatment when you eventually sell, as long as you hold the shares for more than one year. The election also starts your qualified small business stock (QSBS) eligibility period on day one, which has significant implications for Section 1202.

What the Tax Savings Actually Look Like

The financial case for filing comes down to one number: the gap between ordinary income tax rates and long-term capital gains rates. For founders whose shares appreciate significantly between grant and vesting, this rate difference determines whether they keep hundreds of thousands of dollars or send them to the IRS as ordinary income tax.

The Rate Difference

The examples below put real numbers to the difference.

The top tax rate sits at 37 percent, while the top federal long-term capital gains rate is 20 percent. That 17 percentage point spread is the engine behind the 83(b) election's value. High-income taxpayers may also owe the 3.8 percent Net Investment Income Tax on capital gains. 

This brings the effective top rate to 23.8 percent and narrows the gap to 13.2 percentage points. Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) made the Tax Cuts and Jobs Act (TCJA) individual rate cuts permanent, so the ordinary rate remains at 37 percent rather than reverting to 39.6 percent, and the rate differential that makes the election valuable is now locked in.

A Seed Stage Example

A founder receives 100,000 shares at a grant-date value of $0.01 per share, and the shares grow to $1.00 per share at vesting and $5.00 per share at sale. With an 83(b) election filed, the founder pays $370 in ordinary income tax at grant (37 percent of $1,000) and $99,800 in long-term capital gains at sale, for a total tax bill of $100,170. 

Without the election, the founder owes $37,000 in ordinary income at vesting plus $80,000 in capital gains at sale, totaling $117,000, which means the savings in this example are roughly $16,830. 

For a high-growth company with a million shares on a four-year vest, the difference can reach well into six figures because each vesting tranche triggers a separate ordinary income hit at progressively higher valuations. 

The pattern holds across scenarios: greater appreciation between grant and vesting increases the election's value.

What Changed in 2025 and 2026

The 83(b) election has existed for decades, and recent updates changed how founders file in practice, including the first standardized IRS form and a new electronic filing option. The two updates that matter most are the arrival of Form 15620 and a now-permanent individual rate structure, both of which affect the election's value and the mechanics of filing it.

Electronic Filing and Form 15620

The IRS released Form 15620 on November 7, 2024. For the first time, founders had a standardized election form rather than needing to draft their own. The IRS issued a revised version in April 2025, and electronic filing launched in late July 2025. 

The e-filing process generates Form 15620 through an online questionnaire and provides immediate confirmation of receipt, which removes the postmark anxiety that made mail filing stressful.

TCJA Rates Made Permanent

The OBBBA preserved the individual income tax brackets scheduled to expire at the end of 2025. In the absence of that legislation, the top ordinary income rate would have reverted from 37 percent to 39.6 percent in 2026. For founders weighing the 83(b) election, rate stability means the tax math remains consistent and predictable going forward.

Expanded QSBS Benefits

The OBBBA expanded Section 1202 QSBS benefits for stock acquired after July 4, 2025. Qualifying companies now face a gross asset cap of $75 million, and the maximum gain exclusion rose from $10 million to $15 million. 

A new tiered holding period replaced the previous flat five-year requirement: 50 percent exclusion after three years, 75 percent after four years and 100 percent thereafter. Filing an 83(b) election can start the holding period clock at the grant date.

Mistakes That Can Cost You

The 83(b) election takes minutes to file, but it is unforgiving when something goes wrong. Most of the costly errors happen not because the process is complex, but because founders are building a company and this filing is not top of mind.

Common Filing Errors

A basic checklist and a calendar reminder on the day shares are issued can prevent most of these problems. The errors that most often create avoidable tax consequences or validity issues include:

• Missing the 30-day deadline: The window runs from the date your stock is transferred, and the IRS provides no extensions for late filers. A prudent approach is to file the election as soon as possible after your stock is issued, and no later than 30 days after the grant date.
• Not providing a copy to your company: Filing with the IRS alone is not sufficient, as delivering a copy to the company that issued your shares is a separate validity requirement. Written confirmation of the company's receipt protects you if questions arise later.
• Thinking you still need to attach a copy to your tax return: The IRS eliminated this requirement in 2016. For stock transferred on or after January 1, 2016, taxpayers are no longer required to attach a copy of the 83(b) election to their tax return; they must file the election with the IRS and provide a copy to the company, while remaining subject to general recordkeeping obligations.
• Errors in the election document: Inaccuracies in share count, purchase price, fair market value or taxpayer identification number can create grounds for the IRS to challenge validity. Form 15620 is an optional IRS form for making an 83(b) election.
• Misunderstanding which instruments qualify: Unexercised stock options and restricted stock units (RSUs) do not qualify. The election applies only to actual shares of restricted stock that have been transferred, or to shares received through early exercise of options.
• Ignoring the forfeiture risk at higher valuations: If you file an 83(b) election and later leave before fully vesting, you forfeit your unvested shares with no refund of taxes paid. At par value this risk is negligible, but for grants at meaningful fair market values (post-Series A for example) the upfront tax can be real.
• Attempting a cancel-and-reissue workaround: Some founders try to cancel and re-issue stock after missing the deadline to restart the 30-day clock. The IRS has addressed this approach and the conclusion is unfavorable absent a genuine change in terms and circumstances.

These errors all point to the same practical lesson: founders benefit from treating the election like a same-day formation task, not something to revisit later. A clean filing process early is usually much easier than trying to deal with a missed deadline or document problem down the road.

CRV led DoorDash's first financing round and backed the company again during its Series A and B. The firm led Mercury's Series A and participated in its Series B and C. CRV led Vercel's Series A and backed the company through its B, C, D and E rounds. 

Through these long-term relationships, we've seen how the operational details founders get right at formation, including filings like the 83(b) election, shape outcomes over years of growth. We've seen this pattern across our companies: clean early filings remove friction in diligence and keep cap tables tidy through later rounds.

How the 83(b) Election Connects to QSBS

The interaction between the 83(b) election and Section 1202 QSBS treatment is potentially worth millions of dollars at exit. With an 83(b) election filed, your QSBS holding period starts at the original grant date. Without an election, the holding period for each share begins only when that specific share vests, which can delay or eliminate QSBS eligibility before a liquidity event.

An 83(b) election does not independently guarantee QSBS treatment. The company must separately satisfy all Section 1202 requirements: domestic C-corporation status, aggregate gross assets below the threshold at issuance and stock acquired at original issuance, among other conditions. Filing the election early can help start the QSBS holding period while the company is still below the asset cap, and shares that qualify at issuance generally continue to qualify even if the company later grows past the threshold.

Why Filing in Month One Compounds Over Years

The 83(b) election is one of those rare decisions where a few minutes of paperwork in your company's first month can save hundreds of thousands of dollars years later. We've seen this across decades of working with founders: the operational details you get right early produce the largest long-term payoffs. 

If you're an early stage founder looking for a long-term partner who understands the financial and structural decisions that shape your company from day one, reach out to us to see if we'd be a good fit.

Frequently Asked Questions

What happens if I miss the 30-day filing window?

The consequence is permanent. Under IRC §83(a), the default rule applies for the life of your shares, meaning every vesting event becomes a separate ordinary income tax event at the fair market value on that date. For a startup that grows significantly, this creates multiple large tax obligations on illiquid stock. No administrative relief procedure exists for a late Section 83(b) election.

Can I revoke my 83(b) election if the stock price drops?

A decline in stock value is not grounds for revocation. After the 30-day window closes, revoking the election requires IRS Commissioner consent, which is only available for demonstrable mistakes of fact about the underlying transaction. One narrow exception is that the IRS generally approves timely revocations filed within 30 days of the original election window regardless of reason. For most founders filing at par value, the upfront tax is so small that the downside of a drop in value is negligible.

Does each co-founder need to file a separate election?

Each founder must file their own individual 83(b) election. There is no joint or representative filing mechanism. If co-founders receive shares on different dates, each person's 30-day deadline runs from their individual share issuance date, not from a shared reference point. Storing copies of all election forms in company records is a best practice for cap table management.

Should I file if the company might fail or I might not vest fully?

The risk-benefit calculation depends on what the stock is worth at grant. For founders receiving shares at or near par value, the upfront tax is negligible or zero, so the downside if you leave before vesting is correspondingly small. The calculus shifts for later stage grants at meaningful fair market values, where the upfront tax obligation is real and should be weighed against the probability of remaining through full vesting. At incorporation, the near-zero tax liability means filing is nearly always the right call.

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