# Incentive Stock Options

*Retirement & Benefits — Finicade finance glossary*

Incentive stock options can qualify for long-term capital gains treatment on the entire gain if you hold the shares long enough after exercise and grant. The trap is the alternative minimum tax: the spread at exercise is invisible for regular tax but fully counted for AMT, so employees have owed six-figure tax bills on paper gains that later evaporated when the shares fell. Exercise timing needs modelling, not enthusiasm.

**Also known as:** ISO, ISOs, qualified stock options

**Related terms:** [Employee Stock Options](https://finicade.com/glossary/employee-stock-options), [Alternative Minimum Tax (AMT)](https://finicade.com/glossary/alternative-minimum-tax), [Capital Gains Tax](https://finicade.com/glossary/capital-gains-tax), [Vesting](https://finicade.com/glossary/vesting), [Restricted Stock Units (RSUs)](https://finicade.com/glossary/restricted-stock-units)

Source: https://finicade.com/glossary/incentive-stock-options