83(b) elections: the 30-day clock that doesn't apply to RSUs
The 83(b) election is one of the most powerful — and most misunderstood — provisions in equity compensation. Used correctly at an early-stage startup, it can convert years of future ordinary income into capital gains. Used incorrectly, or attempted where it doesn't apply, it does nothing at all.
What it does
Normally you're taxed on equity when it vests, at the value on that future date. An 83(b) election lets you choose to be taxed immediately instead — on the value today, while the shares are still unvested. If the shares are worth $0.10 today and $50 when they vest, you pay ordinary income tax on $0.10 now, and all the later appreciation is capital gain when you sell.
At a brand-new startup, "today's value" is often near zero — which is what makes the election so powerful there, and nearly pointless at a public company where the value is already established.
When it applies (and when it doesn't)
- Applies to: restricted stock awards (actual shares granted subject to vesting, common for founders and very early employees) and early-exercised stock options — options you exercise before they've vested, if your company allows it.
- Does NOT apply to: standard RSUs. This is the single most common confusion. RSUs are a promise of future shares, not shares — there is nothing to elect on. No 83(b) filing will change how your RSUs are taxed, ever.
The 30-day rule: no extensions, no exceptions
The election must be filed with the IRS within 30 days of the grant (for restricted stock) or the early exercise date (for options). Day 31 is too late — there are no extensions, no late-filing relief, no "I didn't know." You also give a copy to your employer. Many startups provide a template letter; the IRS just needs the election statement, timely mailed.
The risk nobody mentions
An 83(b) election is irrevocable. If you pay tax on $10,000 of unvested shares and then leave the company before vesting — forfeiting the shares — you do not get that tax back. You've paid real tax on shares you never kept. Only file when you're reasonably confident you'll stay through vesting, or when the amount at stake is small enough to lose.
Should you file one?
The math favors filing when three things are true: the current value is low, you expect the value to grow substantially, and you'll vest. Early startup employees exercising options at a $0.10 strike price check all three boxes. Everyone else should think twice — and anyone holding standard RSUs should stop thinking about it entirely, because it doesn't apply.