83(b) election

83(b) Election

Definition: A tax filing that allows recipients of restricted stock to pay taxes on the grant value immediately rather than waiting until the shares vest.

Key points:

• Accelerates taxation to grant date when share values are typically lower
• Must be filed with the IRS within 30 days of stock issuance—no exceptions
• Can significantly reduce tax liability if company value appreciates

For startup founders and early employees, an 83(b) election can be particularly valuable. By paying taxes upfront on potentially low-valued shares, you avoid higher tax bills later when shares vest at what could be substantially increased valuations.

Example:

If you receive 10,000 shares valued at $0.10/share at grant but worth $5/share when they vest, filing an 83(b) election means paying taxes on $1,000 now rather than $50,000 later. Reach out to us at Afino or consult a tax attorney before making this election, as it cannot be reversed and may not benefit everyone's situation.