incentive stock option

Incentive Stock Options are commonly referred to as ISOs. This type of stock is only available to the employees of the company it represents. The incentive of an ISO is that there are tax reductions on its profits. Rather than the profit of these stocks be taxed as normal income for the individual, they are taxed as long term capital gain which has lower rates than income taxes. This type of stock was created to help companies boost the value of their own stock. The downside to ISOs is that they have requirements for minimum holding time, increasing risk.

Fast Facts

ISOs may also be taxed by what is called 'alternative minimum taxes.
A Qualified Tax Option is another common name for an ISO

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