Section 83(i) lets an eligible employee of a qualifying private company defer income tax on a stock option or RSU spread for up to 5 years — unless they’re an excluded employee.
How it works
An eligible, non-excluded employee’s full exercise or vesting spread becomes deferred income, taxed later rather than now. An excluded employee (the CEO, CFO, top 4 compensated officers, or a 1%-or-greater owner) gets no deferral — the spread is taxed immediately as usual.
What this does not include
This does not include the requirement that the issuing corporation itself qualify as an “eligible corporation” — privately held, with a written plan offering equity to at least 80% of U.S. employees — a separate condition this calculator assumes has already been met.
How to use this calculator
- Enter the exercise or vesting spread and whether you’re an excluded employee.
Frequently asked questions
Does the 83(i) deferral apply to payroll taxes too?
No — it defers income tax only; Social Security, Medicare, and FUTA taxes are still due in the year of exercise or vesting, not deferred.
What ends the deferral period early?
The stock becoming publicly tradable, the employee becoming an excluded employee, revoking the election, or the employee electing to end it early are among the events that can trigger earlier taxation.
Why would a company’s top officers be excluded?
Congress designed 83(i) to help broad-based employee equity, not further concentrate a tax break among a private company’s highest-paid executives and largest owners.
