Got incentive stock options? Here’s what you need to know about their tax treatment: You owe no tax when ISOs are granted and no regular income tax when you exercise ISOs (but there could be alternative minimum tax consequences). If you sell the stock after holding the shares at least one year, you generally pay tax at your long-term capital gains rate. If you sell the stock before one year, any gain is taxed at your ordinary-income rate. We can help you ensure you’re reporting everything properly on your 2016 return and avoid potential interest and penalties.