Glossary A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z | 1 | 3 | 4 | 5 Definitions by InvestorWords.com   What is...? Type There are many differences between incentive stock options (ISOs) and non-qualified stock options (nonquals). The biggest difference between the two is how taxes are calculated. A non-qualified stock option (nonqual) is the most common form of stock option. It may be granted to employees, officers, directors, consultants, and other providers of goods and services associated with a company. Nonquals are so named because they do not qualify for special tax treatment under the U.S. Internal Revenue Code. Non-qualified stock options are treated as regular income and are usually taxed at your compensation income level. Incentive stock options can be taxed at varying levels. ISOs qualify for special tax treatment under the Internal Revenue Code if they meet certain requirements set forth in the Code. ISOs are not granted by all companies, and can be granted only to employees. There is a $100,000 limit on the aggregate grant value of ISOs that can vest in any one calendar year. Like most stock options, ISOs must generally be exercised within three months following termination of an option holder's employment. If you hold the stock you acquire by exercising an option for at least two years from the date of the grant, and at least one year from the date of exercise, you may be eligible for favorable long-term capital gains tax treatment for any Copyright ©2009 by InvestorGuide.com. All Rights Reserved.