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Incentive stock options (ISO)

What are incentive stock options?

Incentive Stock Options (ISOs) are a type of employee benefit that gives employees the right to buy company shares at a discounted price. ISOs are a form of equity compensation and are often used by startups to attract and retain talent.

ISOs have favorable tax treatment compared to other forms of stock options. The employee does not have to pay tax at the time of grant or exercise (with the exception of the Alternative Minimum Tax), only when the shares are sold. If certain conditions are met, the gain can be taxed as a long-term capital gain.

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