My RSUs were granted in California but vested after I moved to Texas — can California still tax them?
Yes. California taxes the portion of RSU income attributable to work you performed in California, using a workday allocation between the grant date and the vest date. Moving to Texas stops California from taxing future grants, but it does not erase the California slice of grants already vesting.
California's sourcing rule for equity compensation
The FTB treats RSU income as compensation for services. For a nonresident or part-year resident, the California-source portion is determined by where the services were performed during the earning period — which for RSUs is the period from grant date to vest date. FTB Publication 1004 gives the standard allocation:
California allocation ratio = California workdays from grant date to vest date ÷ total workdays from grant date to vest date
The ratio is applied to the income recognized at vesting (the fair market value on the vest date). Example: you were granted RSUs while working in California, and between grant and vest you logged 600 workdays in California and 400 in Texas. Then 60% of the vesting income is California-source and taxable by California, reported on Form 540NR (Schedule CA, Column E for the California-sourced portion of W-2 wages).
| Factor | What matters |
|---|---|
| Grant date | Start of the measuring period — work before the grant doesn't count |
| Vest date | End of the measuring period — income is recognized here |
| Workdays in California | Days you physically worked in CA between grant and vest |
| Move date | Only matters as the day the California workday count stops growing |
| Texas residency | Irrelevant to the California slice — Texas has no income tax, but California's claim on its portion stands |
What this means in practice
- Grants that fully vest after the move are still partly California-source for the workdays before the move.
- Grants made after you became a Texas resident are not California-source at all (assuming the work was done in Texas).
- Your employer may keep withholding California tax on post-move vests. The withholding is just an estimate; the 540NR reconciliation determines what you actually owe, and excess withholding comes back as a refund.
- Stock options follow the same principle — California looks at where services were performed during the relevant period — though the measuring period can differ (grant to exercise for some option types), so check the specific award.
Frequently asked questions
I moved mid-vesting and my company withheld zero California tax. Do I still owe?
Possibly, yes. Withholding is the employer's estimate, not your liability. If the allocation shows a California-source portion, you owe California tax on it via the 540NR, and you may owe an underpayment penalty if too little was withheld. Run the workday math before you file.
What records do I need to prove my workdays?
Grant agreements with dates, vesting schedules, employment records or calendars showing work location by day, and any travel logs. The FTB can ask for the day-by-day breakdown — "roughly half the year in Texas" is not a defense.
Does the same rule apply if I move to another taxing state instead of Texas?
The California sourcing math is identical. The difference is that your new resident state may give you a credit for the California tax paid on that RSU income (capped at the new state's tax on it) — see our guide on the other-state tax credit.
Sources
- https://us-wealth-guide.com/tools/us-state-relocation-calculator/
- FTB Publication 1004: Equity-Based Compensation Guidelines (ftb.ca.gov)
- California Revenue & Taxation Code §17951
- Form 540NR Schedule CA instructions (ftb.ca.gov)