21 June 2022 5:06

Tax implications of exercising ISOs and using proceeds to exercise more ISOs

Taxation on ISOs. You don’t pay taxes on ISOs when they are granted, vested, or exercised. You pay taxes when the shares are sold. If you meet specific holding requirements, profits from the stock sale are taxed at a more favorable capital gains rate.

How do you avoid disqualifying disposition?

To avoid a disqualifying disposition you have to hold the stock you acquired by exercising your ISO beyond the later of the following two dates:

  1. One year after the date you exercised the ISO, or.
  2. Two years after the date your employer granted the ISO to you.