Updated December 2025

Your ISO Holding Period Starts at Exercise, Not Grant

If you have incentive stock options (ISOs) or non-qualified stock options (NSOs), your QSBS holding period starts on the date you exercise—not the date you were granted the options.

This is the most common QSBS mistake. People think they've been holding for 6 years when they've actually been holding for 2.

Why This Confuses People

It feels like you've "had" the stock since your grant date. You've been at the company. You've been vesting. The options have been sitting in your Carta account.

But you didn't own stock. You owned the right to buy stock.

QSBS requires you to hold stock—actual shares. The clock doesn't start until you have shares. For options, that means exercise.

Timeline example:

2019: Options granted (4-year vest)

2020: 25% vested

2021: 50% vested

2022: 75% vested

2023: Fully vested, you exercise all options ← CLOCK STARTS HERE

2028: 5-year holding period complete ← QSBS QUALIFIED

If you try to sell in 2025, thinking you've held since 2019, you're wrong. You've held since 2023. You don't qualify until 2028.

The $487K Mistake

Last year, an employee at a YC company exercised their options on December 15, 2019. They tried to sell on December 10, 2024—thinking 5 years had passed.

It hadn't. Five years from December 15, 2019 is December 16, 2024. They were 6 days early.

The entire QSBS benefit was lost. On their gain, that was roughly $487,000 in federal taxes they could have avoided by waiting one week.

Six days. Half a million dollars.

Check Your Exercise Date

Enter your exercise date and expected sale date. We'll tell you exactly when you qualify.

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Your Stock

Stock Type

How Acquired

Key Dates

Your holding period starts at EXERCISE, not grant. This is the #1 mistake people make.

Grant Date

Exercise Date *

Expected Sale Date *

Value

Cost Basis *

What you paid, or the value included in your income

Expected Sale Value *

Your Location

State of Residence *

Your state at time of sale determines tax treatment

ISOs vs NSOs — Does It Matter?

For QSBS holding period purposes, ISOs and NSOs work the same way. The clock starts at exercise for both.

The difference between ISOs and NSOs matters for other tax reasons (AMT, ordinary income vs capital gains), but not for when your QSBS clock starts.

What About Early Exercise?

If you early-exercised your options (bought shares before they vested), your holding period starts at the early exercise date—assuming you filed an 83(b) election within 30 days.

This is one of the few ways to start your QSBS clock earlier. Early exercise + 83(b) = holding period starts at exercise, even though shares aren't vested yet.

Warning: If you early-exercised but didn't file an 83(b), your holding period starts when shares vest. The IRS treats you as if you received the stock at vesting.

Quick Reference

Scenario	Holding Period Starts
ISOs, exercised normally	Exercise date
NSOs, exercised normally	Exercise date
Early exercise + 83(b) filed	Early exercise date
Early exercise, no 83(b)	Vesting date