The $100K ISO limit (also known as the $100K rule) prevents employees from treating more than $100,000 worth of exercisable options as incentive stock options (ISO) in a single year. The first $100,000 of stock options that become exercisable for an employee in a year can be issued as ISOs, and any additional stock options will be taxed as non-qualified stock options (NSO). ISOs are not taxed when exercised, so the $100K ISO limit aims to prevent abuse of this tax benefit. To comply with the $100K rule, your company may divide option grants that exceed the $100,000 threshold into ISO and NSO portions. This division is commonly called an ISO/NSO split.