RSU State Taxes When You Move: California, New York, and the States That Follow You

Many tech employees move from California to Washington or Texas expecting to escape state income tax. They're surprised when the California Franchise Tax Board sends a notice two years later. If you worked in California — or New York — while your RSUs were building toward a vest date, those states have a legal claim on a portion of the income when the shares land. Here's how that works, with real numbers.

The core concept: states tax the work, not the paycheck

When RSUs vest, the income isn't treated as "wherever you live today" income by states like California and New York. Instead, those states look backward to where the work was performed that earned the RSUs. Because RSUs are a form of deferred compensation for services rendered over a vesting period, the income is allocated proportionally to the days you worked in each state during that period.

The practical result: if you spent two years working in California before vesting, California can tax roughly two years' worth of your RSU income — even if you moved to Seattle or Austin before the shares ever hit your account.

California's allocation formula

The California Franchise Tax Board applies what it calls the grant-to-vest allocation method — confirmed by California's Office of Tax Appeals and documented in FTB Publication 1100.¹

The formula:

The denominator is the total number of workdays from the grant date to the vest date. The numerator is the days you worked in California within that same window. The resulting fraction is applied to whatever the shares were worth when they vested.

Worked example

You join a company in San Francisco on January 1, 2023, and receive an RSU grant with a 4-year vesting schedule (25% per year). You work in California for 2 years, then move to Seattle on January 1, 2025. Your first annual cliff vests on January 1, 2024 — still in California. Your second annual cliff vests on January 1, 2026, one year after your move.

For the second cliff vest on January 1, 2026:

• Grant-to-vest period: January 1, 2023 → January 1, 2026 = approximately 783 workdays
• Days worked in California: approximately 522 workdays (Jan 2023 – Dec 2024)
• CA allocation: 522 ÷ 783 = 66.7%

If those shares are worth $200,000 at vest, California claims tax on $133,400. At California's top marginal rate of 13.3%, that's a $17,742 California tax bill — on shares that vested while you were a Washington State resident.

Your Washington state tax on those same shares: $0 on ordinary income (WA has no income tax), though if you hold shares for a year and sell at a gain exceeding $278,000, Washington's capital gains tax applies at 7% on that excess (see below).⁵

What counts as a California "workday"

Days you were physically present and working in California. Remote work matters: if you were employed by a CA company but physically working from another state, those are not California workdays for sourcing purposes — assuming you were not a California resident and the work was genuinely performed outside the state.

The distinction breaks down in practice when employees:

• Claim to have moved but still work occasional weeks in California offices
• Claim to be remote workers but have failed to change their state of domicile
• Travel to California headquarters regularly and log physical workdays without tracking them

The FTB uses travel records, expense reports, badge swipes, and employer records in audits. Every workday in California that you don't count as a CA workday is a potential audit adjustment.

New York: the same formula, plus the "convenience of employer" rule

New York applies an analogous workday allocation formula for RSU income sourced to NY.² The mechanics are similar: (NY workdays during grant-to-vest) ÷ (total workdays) × RSU income. Top New York State rate is 10.9% for high earners; NYC residents add up to 3.876% city tax, for a combined marginal rate above 14% on RSU income for NYC residents.

What makes New York more aggressive is the "convenience of the employer" rule: if you work remotely for a New York-based employer from another state, and the remote arrangement is for your convenience rather than a bona fide business necessity of the employer, New York treats those remote days as New York workdays for sourcing purposes.³

California does not have an equivalent convenience rule: if you are a nonresident physically working from another state, California does not source those days to California. This distinction makes New York particularly difficult to escape for employees whose employers are headquartered there.

What "moving" actually requires: the domicile burden

State tax authorities — particularly California — audit move claims aggressively. The FTB's Residency and Sourcing Technical Manual (revised January 2026) identifies more than 20 factors used to evaluate whether someone has truly changed domicile.⁴

A partial move does not clear the bar. Common mistakes that leave employees as California residents in the FTB's eyes:

• Keeping a California driver's license after the claimed move date
• Remaining registered to vote in California
• Keeping a spouse or children in a California residence
• Maintaining a home in California while renting in the new state
• Logging more than 546 hours of presence in California in a year (a factor — not a hard rule)
• Keeping primary banking, professional, or religious affiliations in California
• Failing to register vehicles in the new state

A complete domicile change means updating everything — not just mailing address. The FTB also has audit authority to request California returns from out-of-state residents who had California-source income, meaning the allocation formula applies even if the FTB has to chase you for it.

Washington: "no income tax" does not mean zero state taxes on your RSUs

Washington is the most popular destination for tech workers fleeing California's income tax. The headline is accurate: Washington has no personal income tax on wages or RSU vesting income.

However, Washington imposes a capital gains tax on the appreciation in shares after vest:

• 7% on net long-term capital gains above $278,000 per year (2026, indexed annually)⁵
• 9.9% on long-term gains above $1,000,000
• Applies only to long-term gains (assets held more than one year)
• Real estate and retirement accounts are exempt
• The $278,000 threshold is per individual

For a FAANG employee with $600,000 of RSU vests who holds shares for a year and sells at a $400,000 gain: that $400,000 gain — above the $278,000 threshold — is $122,000 taxed at 7% = $8,540 WA capital gains tax. Not zero, and not nothing, but dramatically lower than the 13.3% ordinary income + 20% LTCG + 3.8% NIIT picture in California.

The planning implication: if you have large long-term gains concentrated in a single year (e.g., after a lockup expiration or large sell-down), spreading sales across two calendar years to stay below the annual threshold can eliminate WA capital gains tax entirely.

Texas and Florida: actually clean

Texas and Florida have no state income tax and no capital gains tax. RSU income at vest, capital gains on share sales, and dividends are all free from state tax. For high-income tech employees with large RSU packages, the long-run effective benefit of establishing domicile in Texas or Florida — relative to California — can be measured in hundreds of thousands of dollars over a career.

The trade-off is non-financial: cost of living, weather, access to tech ecosystem, etc. But from a pure state-tax standpoint, Texas and Florida offer the cleanest break from California or New York.

Pre-move planning: timing matters

If you're planning to move from California to a lower-tax state and have RSUs vesting over the next few years, the order of operations matters significantly.

Vest date vs. move date: Shares that vest after your move date are still partially sourced to California if your grant dates preceded the move. But shares that vest after the entire grant-to-vest period is post-California will have zero California allocation. If you have grants made after your move, none of that income is California-sourced (assuming genuine domicile change).

Accelerating vests before the move: In some cases, it may make sense to model whether early exercise of options, or voluntary vest acceleration (if available), would generate California income at California's rate that is lower than future post-move income would otherwise generate. This is a situation-specific calculation.

New grants after the move: Any RSU grant made after your effective move date will have zero California allocation if you are no longer a California resident and the work is performed outside California. This is the clean break point — it just takes time for the grant history to "rotate out."

The ISO and NSO version of this problem

California's grant-to-vest allocation applies to RSUs. For stock options (ISOs and NSOs), the allocation period is generally grant date to exercise date, since exercise is when income is recognized for NSOs (and when the AMT spread is measured for ISOs). If you exercise ISOs or NSOs after moving, but the options were granted while you were a California resident, California will claim a portion of the spread — calculated on the same workday allocation basis.

This is a common trap for employees leaving a California company with unvested options who plan to exercise post-move and assume they've escaped California tax on the spread.

What a specialist advisor handles

Multi-state RSU sourcing is one of the most common overlooked exposures for high-income tech employees. A fee-only advisor specializing in equity compensation will:

• Calculate the exact California (or New York) allocation fraction for each outstanding grant based on your work history and planned vest dates
• Model the true after-tax cost of exercising options before vs. after a planned move
• Review your domicile change for FTB audit risk — whether your behavior supports the claimed effective date
• Coordinate the move date with vest schedule to minimize exposure on remaining grants
• Identify whether WA capital gains tax planning (spreading sales across years) applies to your post-move position