Incentive Stock Option A type of employee stock option that has the specific tax advantage of paying at a capital gains rate rather than as ordinary income tax when the option is exercised. Home Resources Startup Law Dictionary Incentive Stock Option Return to Glossary Need legal help? Schedule a free consultation with a world-class startup attorney on LawTrades. LET'S CHAT Roy G. Business Attorney Heather N. Business Attorney Jared S. Business Attorney Tell us about your project We'll connect you with a vetted attorney in just a few minutes. Trusted by top companies like :