83(b) Election Calculator

When you receive stock that is still subject to vesting — an early-exercised option grant, or restricted stock at a startup — the default rule in §83(a) taxes you as each tranche vests, on whatever the shares are worth on each of those dates, as ordinary income. If the company grows, so does the bill, year after year.

An 83(b) election reverses that. You choose to be taxed once, immediately, on the spread as it stands today. For an early exercise at a strike equal to the current 409A valuation that spread is zero, so the election costs nothing — and every dollar the shares gain afterwards becomes a long-term capital gain instead of ordinary income.

This is one of the highest-return pieces of paperwork in the tax code, and it has a thirty-day deadline that cannot be extended, waived, or fixed afterwards. It is also occasionally the wrong call: if a spread already exists and the company then declines, you will have paid ordinary income tax on value that evaporated, with a capital loss you can only use $3,000 of a year. The calculator above prices both paths so you can see which case you are in.

How this is calculated

Two paths through the same grant. What changes is when income is measured, and what kind of income it is.

1. If you elect ordinary income now = shares × (value today − price paid) Recognised once, in the year of transfer. Zero when you paid the current valuation, which is the whole point of an early exercise.
2. If you do not elect at each vest: ordinary income = tranche × (value at that vest − price paid) Recognised again and again, at rising valuations, at your top marginal rate — and with no cash from the shares to pay it with.
3. Your basis price paid + ordinary income already recognised Electing fixes it at today’s value for the whole grant. Not electing gives every tranche its own basis, set on its own vest date.
4. The capital gains clock starts at transfer if you elect, at each vest if you do not This is the quiet second benefit. Without the election, the tranche vesting the year you sell has been held for no time at all, so its gain is short-term and taxed as ordinary income.
5. What you risk tax paid at election, if the shares are forfeited Section 83(b)(2) allows no deduction and no refund for tax paid on shares you go on to forfeit. Leave before vesting and that payment is simply gone.

A worked example

Ana joins a startup and early-exercises 100,000 options at a $0.10 strike, when the 409A valuation is also $0.10. She pays $10,000 for shares that vest over four years, and files an 83(b) election within thirty days.

Because the strike equals the valuation, the election recognises no income at all. It costs her nothing and there is nothing to pay. What it buys is that none of the company’s subsequent growth will ever be ordinary income to her.

Had she not filed, each of the four vesting tranches would have been taxed as wages at that year’s valuation, generating $27,024 of ordinary income across four years — income she would owe tax on while holding shares she cannot sell. The election converts all of it into a single long-term capital gain.

The lifetime saving here is modest in absolute terms because the sums are small. Scale the share count or the growth rate up and it grows very quickly — the mechanism is a percentage of the appreciation, and the appreciation is the part nobody can predict.

Both paths are computed by the same code that runs the calculator, asserted on every build against a case whose year-by-year arithmetic was worked by hand.

What this does not model

Every calculator has a boundary. Here is where this one stops — read it before relying on the number.

• The growth rate is a guess, and it drives everything. This is not a defect of the model but the honest shape of the decision: you are choosing between a certain tax today and an unknown one later. Run a pessimistic figure and a negative one before deciding, not just the optimistic case.
• Every year is priced against your current salary and the 2026 brackets. Real salaries rise and brackets are indexed annually, so a multi-year projection drifts. The comparison between the two paths is far more reliable than either absolute figure.
• Vesting is modelled as equal annual tranches. Real grants usually vest monthly after a one-year cliff, which spreads the unelected income across more, smaller events at slightly different prices. It moves the totals a little and the conclusion almost never.
• A capital loss is only credited in the year of sale, capped at $3,000 against ordinary income. Real carryforwards continue indefinitely into future years, so a large loss is worth somewhat more than shown here — though it can take decades to use.
• Nothing is discounted to present value. Tax paid today and tax paid in six years are added together as though equivalent. Money now is worth more than money later, which makes the election slightly less attractive than the raw comparison suggests.
• Alternative minimum tax is not modelled. Early-exercising incentive stock options is a different calculation with its own AMT consequences even when an 83(b) election is filed.
• Qualified small business stock is not modelled. If the shares qualify under §1202, the election also starts that five-year clock at transfer, which can be worth far more than everything on this page.
• State tax is applied as one flat rate to both ordinary income and capital gains. States that tax capital gains at a preferential rate, and the timing of moving between states during vesting, are both outside scope.

Questions

Sources

Every rate and threshold used above traces to one of these. We cite the statute, the regulation, or the IRS directly — never another commentary site.

• IRC §83(b) — election to include in gross income in year of transfer
• Treas. Reg. §1.83-2 — election under section 83(b), including the 30-day rule
• Rev. Proc. 2012-29 — sample section 83(b) election form
• IRC §1(h) — long-term capital gains rates
• IRC §1211(b) — limitation on capital losses
• Rev. Proc. 2025-32 — 2026 brackets, standard deduction and capital gain thresholds
• Rev. Proc. 2025-32 (2026 inflation adjustments) — §2.15
• Rev. Proc. 2025-32 (2026 inflation adjustments) — §2.01
• 26 U.S.C. §1411 — Net investment income tax (statutory, not indexed)
• Rev. Proc. 2025-32 (2026 inflation adjustments) — §2.03

Related calculators

• QSBS Eligibility & Exclusion CalculatorSection 1202 can exclude millions of dollars of gain from federal tax entirely.
• NSO Exercise Cost CalculatorExercising a non-qualified stock option is a taxable event the moment you do it.
• ISO AMT CalculatorExercising an incentive stock option produces no regular taxable income and can still produce a very large tax bill.
• ESPP Disposition CalculatorSell your employee stock purchase plan shares too early and the whole discount is ordinary income — even if you sold at a loss.