What is a nonstatutory stock option vs incentive stock option?

A nonstatutory stock option vs incentive stock option refers to the differences in these stock options, which include who can receive these options and how the options must be exercised. Incentive stock options, or ISOs, can only be given to full-time or part-time employees.

What are incentive stock options?

Incentive stock options (ISOs) are popular measures of employee compensation received as rights to company stock. These are a particular type of employee stock purchase plan intended to retain key employees or managers. ISOs often have more favorable tax treatment than other types of employee stock purchase plan.

Are stock options statutory or nonstatutory?

Stock options that are granted neither under an employee stock purchase plan nor an ISO plan are nonstatutory stock options. Refer to Publication 525, Taxable and Nontaxable Income for assistance in determining whether you've been granted a statutory or a nonstatutory stock option.