A type of employee stock option which provides tax advantages for the employer that a non-qualified stock option does not, but which is subject to more stringent requirements. In general, an incentive stock option must only be granted to employees, under a specific plan document that states how many options will be given to each employee, within 10 years of receiving shareholder approval and the exercise price must equal or exceed the market price at the time of grant. The option can only be exercised within 10 years of receipt, and there are several rules governing how exercise of the option affects the employer's tax burden.