incentive stock options (ISOs) non qualified stock options (NQSOs)

incentive stock options (ISOs) differ from nonqualified stock options (NQSOs)

-The bargain element (the difference between the current market price at the time of exercise and the strike price) of the ISO (but not the NQSO) is one of the preference items for the alternative minimum tax. -Only the ISO has a maximum time limit, and it is 10 years, not five. -It is the bargain element of the NQSO that is reported as wages and it is possible, although difficult, to have long-term capital gains on both

incentive stock options (ISOs) favorable tax treatment time limit

-the favorable tax treatment associated with ISOs is lost if the shares acquired through the ISO exercise are sold before 1 year from the date of grant or 2 years from the date of exercise -You are not taxed upon exercise, only upon sale, but the incentive portion of the option could be considered a preference item for purposes of AMT

nonqualified stock option exercise price vs strike price

In the case of NSOs, the difference between the exercise (or strike) price and the current market value is considered salary to the employee.