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🇺🇸 US · US tax

Qualifying disposition

Also called: qualifying sale

In one line

Selling ISO shares after meeting both holding periods, so the entire gain qualifies for long-term capital-gains treatment.

In plain English

Hold ISO shares at least two years from grant and one year from exercise, and the whole profit is taxed at the lower long-term rate. That's the reward ISOs are designed for.

If you were explaining it to a 5-year-old

You kept the discounted toy long enough, so when you sell it you get the full tax discount the voucher promised.

Why it matters when you sell

Reaching a qualifying disposition can meaningfully cut the tax on a sale — sometimes a reason to wait a little before selling in a secondary.

Related terms

Incentive stock option (ISO)Disqualifying dispositionLong-term capital gainsHolding period

Put it to use

Cost to exercise + AMT

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Sources

Primary references for this term: IRS (US tax). Our definitions are written in plain English and kept evergreen — see the glossary methodology. General information, not advice.

Educational information only — not financial, tax or legal advice, and not an offer to buy or sell any security. Definitions are general; your own documents and local law govern your situation. PrivateTechShares is independent and not a broker or marketplace.