HOW INCENTIVE STOCK OPTIONS (ISOs) CAN QUALIFY FOR SPECIAL TAX BENEFITS

Incentive stock options (ISOs) can qualify for special tax benefits under the tax code (if certain requirements are met):

- The employer can structure compensation to an employee that is not subject to Social Security or Medicare taxes
- The employee gets favorable long-term capital gains tax rates when they sell their exercised ISO stock

In order to receive those full benefits, an employee would need to hold the acquired stock for at least two years from when the stock options were granted, and one year from date the stock options were exercised.