Is an 83b election ONLY applicable to equity in exchange for services?

Does 83b apply to common stock?

If you receive an early exercisable stock option (when you don’t have to wait for the the stock to vest), you can make an 83(b) election upon receipt of the exercised shares. Section 83(b) elections do not apply to vested shares; the election only applies to stock that is not yet vested.

Can you make an 83 B election on nonqualified stock options?

An 83(b) election may be an option if you are granted non-qualified stock options. The chance to pay a lower capital gains tax rate as compared to ordinary income may make an 83(b) election worth exploring. But it’s not a risk-free proposition.

What happens if you don’t make an 83 B election?

83(b) election, a missed election will place a burden on the company as well. The company will need to decide on a value for newly vested stock at every vesting date and will need to properly report that amount as compensation. However, on the bright side, the company can generally take a deduction for that amount.

Who qualifies for 83b election?

Key Takeaways. The 83(b) election is a provision under the Internal Revenue Code (IRC) that gives an employee, or startup founder, the option to pay taxes on the total fair market value of restricted stock at the time of granting. The 83(b) election applies to equity that is subject to vesting.

Who is eligible for 83b election?

Consider making an 83(b) election if: You receive (i) RS with a low market value per share at the time of grant or (ii) options with a strike price that is close or equal to the market value per share.

Can I file 83b on options?

However, filing an 83b election is only available on stock options you receive with an early exercise option or as a restricted stock award (RSA). In addition, you may need spousal/partner consent to file an 83b election.

How does 83b work with stock options?

Vesting means an employee has earned actual ownership of the company shares or stock options, usually by satisfying a certain time period of employment. Making an 83(b) election means that you’re able to pay income taxes earlier, often before your company shares have had the opportunity to appreciate in value.