This article reflects federal rules and state rules (chiefly California and New York) as of June 2026 and covers tax year 2025 (the 2026 filing season). Tax law changes — confirm current figures before you file.
Quick Answer
When you move states, your RSU income is split between states using a workday allocation ratio — the days you worked in each state from grant date to vesting date, divided by total workdays in that period. Your old state can still tax the portion you earned there, even after you leave.
Many people think moving to a no-income-tax state like Texas before their shares vest erases all state tax on those shares. It does not. The state where you worked while the award was building value keeps the right to tax that slice, and the California Franchise Tax Board and New York both enforce this aggressively against people who relocate.
This matters because the dollars are large and the deadlines are real. A single tech employee with a six-figure RSU vest can owe tax to two states in the same year, and a recent New York case — Matter of Dale A. Adams (2024) — confirmed the state can reach a former resident’s RSU income years after they left.
Here is what you will learn:
- 🧮 The exact workday formula each state uses to source your RSU income, with math you can copy.
- 🗺️ How to avoid being taxed twice using the other-state tax credit.
- ⏱️ Why “trailing nexus” lets your old state tax you after you move away.
- 💸 How withholding (the flat 22% / 37% federal rate) almost never matches what you truly owe.
- 📋 Exactly which forms to file, which records to keep, and when to call a CPA.
How RSUs Are Taxed in the First Place
Before we add a state move, you need the baseline. A Restricted Stock Unit (RSU) is a promise from your employer to give you company shares once you meet a condition — usually staying employed until a vesting date. You own nothing of tax value until those shares vest and land in your account.
At vesting, the fair market value (FMV) of the shares becomes ordinary income, reported on your Form W-2 just like salary. If 100 shares vest when the stock trades at $200, you have $20,000 of wage income that year, whether or not you sell. This is the moment that matters most for a state move, because vesting is the taxable event for the wage portion.
Federal law treats RSU vesting as a supplemental wage. Your employer withholds federal income tax at a flat 22% rate for the year, jumping to 37% on supplemental wages above $1 million in a single calendar year, under IRS Publication 15 for 2026. That 22% is often far below a high earner’s true marginal rate of 32–37%, so a shortfall builds quietly until you file.
A second, separate tax event happens when you sell the shares. Any gain between the vesting-date price and the sale price is a capital gain, taxed at federal capital-gains rates if you held long enough, or as a short-term gain at ordinary rates if you sold within a year. The wage portion and the capital-gain portion follow different state sourcing rules, which is where most relocating taxpayers go wrong.
The Core Rule: States Tax Where You Earned It, Not Where You Live
The single most important idea is this: states source RSU wage income to where you performed the work that earned the award — not to where you live on vest day. You earned the RSU over the entire vesting period by showing up to work, so each state where you worked during that window claims its share.
The tool every state uses is a workday allocation ratio. You count the workdays you spent in a given state between the grant date and the vest date, then divide by the total workdays in that same period. Multiply your total RSU income by that fraction, and that is the amount that state can tax.
California spells this out in FTB Publication 1004: “California will tax the income to the extent you performed services in this state,” using the ratio of California workdays from grant to vest over total workdays from grant to vest. New York uses a nearly identical fraction in its Form IT-203-F instructions, multiplying the RSU compensation by a “New York workday fraction.”
The consequence of ignoring this rule is steep. If you assume your new no-tax state shields everything and you skip a nonresident return, your old state can assess the tax plus penalties and interest years later. Because employers often stop withholding for the old state once you move, the bill comes due all at once at audit, and you keep none of the cash cushion you would have had if it were withheld.
Wage Income vs. Capital Gain: Two Different State Rules
These two pieces of your RSU profit are sourced in opposite ways, and confusing them is a top filing error. The wage portion (value at vesting) is sourced by where you worked during the vesting period. The capital-gain portion (growth after vesting) is sourced by where you live when you sell.
The wage portion follows your past workdays
The income that appears on your W-2 at vesting is tied to services you already performed. So even after you become a Texas resident, California or New York can still tax the slice of that vesting income that matches the workdays you logged there. This is the part people wrongly believe disappears the moment they cross the state line.
The fix is to count workdays carefully and file a nonresident return in the old state for the year the shares vest. Keep a calendar of where you physically worked each day during every open vesting period, because the burden of proof in an audit falls on you, not the state.
The capital gain follows your current home
Growth after the vesting date is investment income, not wages. A capital gain is generally sourced to the state where you are a resident on the sale date. So if you vest in California, move to Texas, then sell a year later at a higher price, the gain after vesting is usually Texas income — and Texas has no income tax, so that portion escapes state tax entirely.
This split is the planning opportunity. The wage value at vest is largely locked to your work history, but the post-vest appreciation can be steered to a no-tax state by establishing residency there before you sell. The catch: a short holding period turns the gain into ordinary income federally, so do not let the tax tail wag the investment dog.
The Workday Allocation Formula, Step by Step
Here is the math both California and New York rely on. The allocation ratio is:
State workdays from grant to vest ÷ Total workdays from grant to vest
Then: State-taxable RSU income = Total vesting income × allocation ratio
Follow these steps for each vesting event:
- Identify the grant date and the vest date for the tranche that vested.
- Count total workdays in that window (exclude weekends, holidays, and PTO — count actual days you worked).
- Count how many of those workdays you physically worked in the old state.
- Divide old-state workdays by total workdays to get the ratio.
- Multiply the vesting FMV by that ratio to get the income the old state taxes.
The remainder is sourced to wherever you worked the rest of the time. If your new state has an income tax, it taxes its share; if it is a no-tax state, that share avoids state tax. Note that a standard double-trigger RSU at a public company often has a one-year vesting cliff plus quarterly vesting, so each tranche has its own grant-to-vest window and its own ratio — you cannot use one blended number for all of them.
Which Situation Applies to You?
The right answer depends on which direction you moved and whether each state has an income tax. Find your case below.
- High-tax state → no-tax state (e.g., CA → TX, NY → FL): Your old state still taxes the workday slice it earned. File a nonresident return there for each vesting year; your new state taxes nothing.
- No-tax state → high-tax state (e.g., WA → CA): Your new state taxes the workdays performed after you arrived. The earlier no-tax-state workdays are not taxed by anyone at the state level.
- High-tax state → high-tax state (e.g., CA → NY): Both states tax their workday share. You may face overlap, so claim the other-state tax credit to avoid true double taxation.
- You sold long after vesting: The post-vest gain is sourced to your residence at sale, separate from the vesting wage allocation.
- Private company / pre-IPO RSUs (double-trigger): No tax until both time-vesting and a liquidity event occur; the workday clock can span every state you lived in across many years.
Worked Example 1: California to Texas (the classic move)
Meet Priya, a software engineer. She received an RSU grant on January 1, 2024, while living and working in San Francisco. The tranche vests on January 1, 2026, and the shares are worth $120,000 at vest. She moved to Austin, Texas on January 1, 2025 — exactly halfway through the vesting period — and worked the second year entirely in Texas.
Her vesting period is 2 years. Assume 250 workdays per year, so 500 total workdays from grant to vest. She worked 250 of those days in California (year one) and 250 in Texas (year two).
- Allocation ratio to California: 250 ÷ 500 = 0.50 (50%)
- California-taxable RSU income: $120,000 × 0.50 = $60,000
- At California’s roughly 9.3% marginal rate on that band, her CA tax on this slice is about $5,580.
- The other $60,000 is sourced to Texas, which has no state income tax, so that half costs her $0 in state tax.
Priya files a California Form 540NR (nonresident) for 2026 to report the $60,000. Her mistake to avoid: assuming her January 2025 move to Texas wiped out all California tax. It did not — California keeps the half she earned while working there.
Worked Example 2: New York to Florida
Meet David, a finance manager in New York City. He was granted RSUs on July 1, 2023, that vest on July 1, 2026, worth $90,000 at vest. He moved to Miami, Florida on July 1, 2025, after working two of the three vesting years in New York.
His vesting period is 3 years (750 workdays at 250/year). He worked 500 days in New York and 250 in Florida.
- New York allocation ratio: 500 ÷ 750 = 0.667 (66.7%)
- New York-taxable RSU income: $90,000 × 0.667 = $60,030
- At a blended NY State rate near 6.85%, David owes roughly $4,110 in New York State tax (plus NYC tax for any period he was a city resident).
- The remaining ~$29,970 is Florida-sourced, and Florida has no income tax, so it costs $0.
David files a New York Form IT-203 (nonresident) with Form IT-203-F to show his workday fraction. The 2024 Adams ruling means New York will use exactly this grant-to-vest workday method if it audits him.
Worked Example 3: California to New York (two taxing states)
Meet Maya, who moved from Los Angeles to New York City mid-grant. Her RSUs were granted January 1, 2024, and vest January 1, 2026, worth $200,000. She worked one year in California and one year in New York (250 workdays each, 500 total).
- California share: 250 ÷ 500 = 50% → $100,000 taxed by California.
- New York share: 250 ÷ 500 = 50% → $100,000 taxed by New York.
Here both states tax their own slice, and because the slices do not overlap, Maya is not double-taxed in this clean example. But if her workdays overlapped or a state claimed a broader period, she would file in her resident state and claim a credit for taxes paid to the other state. New York residents use Form IT-112-R for this resident credit, and California residents use Schedule S.
Trailing Nexus: Why Your Old State Follows You
| What relocating taxpayers assume | What actually happens |
|---|---|
| Moving before vest ends all old-state tax | The old state taxes the workday share you earned there, regardless of where you live at vest |
| The employer’s withholding settles the tax | The employer often stops old-state withholding after the move, so you owe a lump sum at filing |
| No old-state W-2 means no old-state filing | You must file a nonresident return reporting the sourced income even with no withholding shown |
“Trailing nexus” is the principle that lets a state tax income connected to work performed there, even after you become a nonresident. California’s FTB Publication 1004 is explicit that a nonresident on the vesting date is still taxed “to the extent you performed services in this state.” New York’s regulation, applied in the Adams case, sourced a former resident’s RSU income by his grant-to-vest workdays.
The consequence of ignoring trailing nexus is an audit assessment plus penalties and interest, often years later when you have spent the cash. The fix is to file the nonresident return proactively for every vesting year that includes old-state workdays, and to keep contemporaneous records of where you worked.
Withholding Almost Never Matches What You Owe
When RSUs vest, your employer withholds federal tax at the flat supplemental rate — 22% for the year, or 37% on supplemental wages over $1 million, per IRS Publication 15 for 2026. If your true marginal rate is 32% or 35%, the 22% leaves a gap you must cover at filing.
The state side is worse after a move. Employers frequently withhold for your new state only and stop withholding for the old one, even though the old state is still owed its workday share. So you can face a four- or five-figure old-state balance with zero old-state withholding to offset it.
The fix is to estimate the true combined tax in the spring after a vest and make a quarterly estimated payment to the old state if needed, using California Form 540-ES or New York Form IT-2105. Missing estimated payments triggers an underpayment penalty on top of the tax. If you want to control the federal gap at the source, review your Form W-4 and consider extra withholding.
Capital Gains After Vesting: Form 8949 and Schedule D
When you later sell the vested shares, the gain or loss between the vesting price and the sale price is a capital gain or loss. You report each sale on Form 8949 and total it on Schedule D. Your cost basis is the FMV that was already taxed as wages at vesting — do not let a broker report a $0 basis, or you will pay tax twice on the same dollars.
For state purposes, the post-vest gain is sourced to your state of residence on the sale date, not to your old work state. So if Priya from Example 1 sells her Texas-held shares a year after vesting at a higher price, the appreciation is Texas income and avoids state tax. Hold for more than one year after vesting to qualify for lower federal long-term capital-gains rates.
Mistakes to Avoid
- Assuming a no-tax-state move erases old-state tax. The old state still taxes the workdays you logged there, so skipping its return invites an audit assessment plus interest.
- Using one blended ratio for all tranches. Each vesting tranche has its own grant-to-vest window, and lumping them produces a wrong allocation and a wrong tax.
- Ignoring the missing old-state withholding. Employers often stop withholding for the old state, so you owe a lump sum and an underpayment penalty if you do not plan for it.
- Reporting a $0 cost basis at sale. Brokers frequently show $0 basis, which double-taxes the vesting value already on your W-2 and overstates your gain by thousands.
- Counting calendar days instead of workdays. The formula uses workdays, so including weekends and PTO inflates the denominator and misstates the ratio.
- Failing to keep a work-location log. With no records, you cannot defend your allocation in an audit, and the state’s higher number stands.
- Forgetting city taxes. New York City and other localities add their own tax for residency periods, so a state-only calculation understates the bill.
- Missing the nonresident return entirely. No old-state W-2 does not mean no filing duty, and skipping it can extend the audit window indefinitely.
Do’s and Don’ts
Do’s
- Do keep a daily work-location calendar for every open vesting period, because you carry the burden of proof in an audit.
- Do file a nonresident return in the old state for each vesting year with old-state workdays, since the income is sourced there by law.
- Do recalculate the ratio per tranche, as each grant-to-vest window differs and changes the allocation.
- Do correct your cost basis at sale, so you are not taxed twice on the vesting value already in wages.
- Do make estimated payments to the old state when withholding is missing, to dodge underpayment penalties.
Don’ts
- Don’t rely on employer withholding to settle your real liability, because the flat 22% rarely matches your marginal rate.
- Don’t assume residency at vest controls, since wage sourcing follows workdays, not your address on vest day.
- Don’t sell immediately for tax reasons if it converts a long-term gain into higher-taxed ordinary income.
- Don’t ignore local taxes like NYC’s, which apply on top of the state tax for resident periods.
- Don’t guess your move date, because an imprecise residency date distorts both the allocation and the credit.
Pros and Cons of Relocating Around an RSU Vest
Pros
- Future appreciation can escape state tax, since post-vest capital gains are sourced to your new no-tax residence.
- New vesting workdays in a no-tax state are untaxed, shrinking the taxable slice going forward.
- A clean residency change simplifies later years, as fewer states claim a share once the old-state workdays roll off.
- Lower overall rate, because high earners can cut a 9–13% state burden to zero on the new-state portion.
- Estate and overall planning benefits, since many no-tax states also lack estate or capital-gains tax.
Cons
- The earned wage slice stays taxable in the old state, so you cannot escape tax on work already performed.
- Dual-state filing adds cost and complexity, often requiring a CPA for the year of the move.
- Audit risk rises, because high-tax states scrutinize relocations and demand workday proof.
- Withholding gaps create cash crunches, as you may owe a lump sum with nothing withheld.
- Residency must be genuine, since a sham move can be unwound, restoring the full old-state tax plus penalties.
What to Do Next
- Gather your grant documents — note every grant date, vest date, and vesting FMV for shares that vested in or after your move year.
- Build a workday log showing where you physically worked each day during each vesting period.
- Compute the allocation ratio per tranche and the income sourced to each state.
- File the old-state nonresident return (CA Form 540NR or NY Form IT-203 with IT-203-F) and your new-state or resident return for the year.
- Claim the other-state tax credit on your resident return if two states tax the same income.
- Make an estimated payment to any state where withholding fell short, before the next quarterly deadline.
- Call a CPA or tax attorney if you crossed $1 million in wages, hold pre-IPO RSUs spanning several states, or receive an audit notice — this typically involves a multi-state return preparation and, for audits, formal representation.
This article is educational and is not a substitute for advice from a licensed professional for your specific situation. Multi-state equity comp is one of the most error-prone areas in tax, so a one-time consultation in the year you move is usually money well spent.
FAQs
Do I still owe California tax on RSUs if I moved to Texas before they vested?
Yes. California taxes the share of vesting income matching the workdays you performed in California from grant to vest, even though you live in Texas on vest day, per FTB Publication 1004.
How do states split RSU income when I move?
By a workday ratio: state workdays from grant to vest divided by total workdays in that period, times the vesting value. Each state taxes only its slice.
Is RSU income taxed when it vests or when I sell?
The wage value is taxed at vesting; any later growth is taxed as a capital gain when you sell. The two follow different state sourcing rules.
What is the federal withholding rate on RSUs for 2025?
22% on supplemental wages up to $1 million, rising to 37% on the excess above $1 million, under IRS Publication 15 for the 2026 tables.
Does New York tax RSUs of a former resident?
Yes. New York sources RSU income by grant-to-vest workdays, confirmed in Matter of Dale A. Adams (2024), and taxes the New York portion via Form IT-203-F.
Will I be taxed twice if two states tax the same RSU income?
No, not on a net basis, if you claim the other-state tax credit on your resident return (NY Form IT-112-R or California Schedule S) to offset the overlap.
Are capital gains on RSUs taxed by my old state after I move?
No, generally. Post-vest appreciation is sourced to your state of residence on the sale date, so a move to a no-tax state can shield that gain.
Which form do I file as a nonresident with RSU income?
California Form 540NR or New York Form IT-203 (with IT-203-F). You file these even if no old-state tax was withheld on the vesting.
Do private-company (pre-IPO) RSUs change the rules?
Yes. Double-trigger RSUs are taxed only when both time-vesting and a liquidity event occur, so the workday clock can span every state you lived in over several years.
What records do I need to defend my allocation?
A daily work-location log for each vesting period, plus grant and vest documents. The burden of proof is on you in a state audit, not on the state.
Does moving to a no-income-tax state eliminate all RSU tax?
No. It eliminates state tax only on the workdays performed after the move and on post-vest gains; the old-state work slice and all federal tax still apply.
When should I hire a professional for multi-state RSU taxes?
When you move mid-grant, cross $1 million in wages, hold pre-IPO RSUs, or get an audit notice. A CPA prepares the multi-state returns and represents you if challenged.