83(b) Election vs. No Election: Side-by-Side Comparison
Your decision comes down to tax timing, cash flow, and risk tolerance. Filing 83(b) favors growth scenarios and long holding periods; skipping 83(b) preserves cash and limits downside if the company falters.
Use this comparison to align the choice with your expected trajectory and liquidity outlook.
Key Takeaways
- 83(b) Benefits Growth: Locks in a low basis and converts future appreciation into capital gains.
- No Election Preserves Cash: No upfront tax; pay only on vested value if and when it exists.
- QSBS Consideration: 83(b) can start the 5-year QSBS clock earlier, potentially unlocking significant exclusions.
When 83(b) Tends to Win
- Very low FMV at grant (pennies or less)
- Strong conviction in long-term growth and holding period
- Ability to cover modest upfront tax
When No Election Tends to Win
- High risk of forfeiture or company failure
- High current FMV or limited cash for taxes
- Shorter expected tenure or uncertain exit timeline
Frequently Asked Questions
Which saves more tax long-term?
If the company’s value grows, 83(b) typically yields lower lifetime taxes by shifting appreciation to capital gains.
When is no election safer?
When cash is tight, FMV is meaningful, or business risk is high. You only pay tax on actual vested value, avoiding upfront outlay.
Get Personalized Help
Have a CPA model both scenarios with your numbers before you decide.
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