I moved out of California two years ago. Does California really still have a claim on my RSU vests?

Yes, for the portion of each grant that was earned while you worked in California. California's sourcing rules apply to the California-work portion of equity grants regardless of your current residency. The Franchise Tax Board actively pursues this and can issue notices years after a move. You're required to file a California nonresident return for any year in which you have California-source income above California's filing threshold (Form 540NR).

My company only withholds for the state I live in now. Isn't that their responsibility?

Your employer is responsible for withholding in the states where they've determined you're working. But the multi-state apportionment calculation for equity grants is almost never done by payroll automatically — it's your (and your CPA's) responsibility to compute the correct allocation and pay the right amount to each state. If California is owed tax on a sourced portion and your employer didn't withhold it, the liability is still yours.

What is the convenience-of-the-employer rule?

It's a doctrine used by a small number of states — most prominently New York — to tax remote workers as if they worked in the state where their employer is based, unless the remote arrangement is required by the employer (not chosen by the employee). If your employer has a New York office that you could use, and you're working remotely from another state by choice, New York may treat your income as New York-source regardless of your physical location.

Can I just pay the state where I live now and avoid the complexity?

No — not legally. Filing only in your current state and omitting nonresident sourcing obligations is incorrect filing and creates exposure to back taxes, interest, and penalties from the state(s) whose claim you omitted. States like California and New York have the data to identify this: they receive information from the IRS and compare federal and state returns.

Is there double taxation if two states both claim my RSU income?

There can be, though it's usually partially offset by credits. Most states allow a resident to claim a credit for income taxes paid to another state on the same income. But if one of the states is a no-income-tax state (Texas, Florida), there's no credit to claim from that state, so the high-tax state's full rate applies. Some multi-state RSU situations result in effective rates higher than any single state's rate alone.

What records do I need to keep for multi-state RSU tax?

At minimum: your grant agreement (grant date, vest schedule), your location records for each day during the service period (calendar, travel receipts, hotel bills), and documentation of when you established and terminated residency in each state (lease agreements, utility setup, vehicle registration, voter registration). If you're ever audited on state sourcing, these records are your evidence.

RSU Tax When You Work Remotely Across States (2026)

The remote work RSU problem nobody warned you about

Here’s the scenario that’s playing out across thousands of Slack messages and tax prep appointments right now.

You accepted a job at a Seattle-based tech company in 2022. The offer letter included 10,000 RSUs vesting over four years. You were living in San Francisco at the time, working remotely from California. In 2024, you relocated to Austin. Your RSUs are vesting on a quarterly schedule. In 2026, a tranche vests.

Simple question: which state taxes that vest?

The answer is not simple. It may be California, Texas, or both. It depends on when the shares were earned, not when they vested. It depends on your employer’s payroll configuration. It depends on whether California has any ongoing claim on your income even though you moved. And it depends on whether you took any steps when you left California to close that claim properly.

This is the core of the remote RSU tax problem. The W-2 your employer sends almost certainly doesn’t reflect the correct state allocation. Your broker has no idea which state should get what. And unless you or your CPA understand sourcing rules, you can end up paying the wrong state — or both states — or filing incorrectly and triggering a notice from a state revenue department years later.

The foundational concept: source-state taxation

Every US state with an income tax has rules about which income it can tax. For wages and equity compensation, most states follow a source-state (or “situs”) approach: income is taxable in the state where the work was performed that generated the income.

For RSUs, the work that generated the income is the service period — the time between grant date and vest date. Lawyers and CPAs call this the “vesting period” or the “numerator/denominator” period, because it forms the basis of the allocation calculation.

The Apportionment Fraction

If your grant was issued January 1, 2023, vests January 1, 2027 (four years), and you spent two of those four years working in California before moving to Texas, California has a legal claim on approximately 50% of the income from that grant. Texas has no income tax, so the other 50% is untaxed at the state level. This ratio — workdays in each state during the service period ÷ total workdays in the service period — is called the allocation (or apportionment) fraction. California uses workdays, not calendar days; other states have similar methods. Some large employers track this and withhold for each state; many don’t, so check your vest statement.

How it works in practice: three scenarios

Scenario 1 — Clean

Moved before the grant was issued

You joined in Texas in 2022. The grant was issued in 2022. You worked in Texas for the entire four-year vesting period. In 2026, shares vest. Result: zero state income tax. No other state has a sourcing claim because all the work that earned these shares was performed in Texas.

The catch: If your company is headquartered in New York and you work remotely, New York may attempt to tax your income under the convenience-of-the-employer rule.

Scenario 2 — Split Grant

Moved mid-grant to a no-tax state

CA resident from grant date (Jan 2023) through Dec 2024, then moved to TX in Jan 2025. Grant vests Jan 2027. About half of the workdays in the service period were in California, so about 50% of the vest is California-source income.

If payroll only withholds for Texas, nothing is withheld for California on this vest. The California tax on that half arrives as a balance due on your California nonresident return.

Scenario 3 — Worst Case

Moved to a higher-tax state mid-grant

FL resident (no income tax) for first two years of a four-year grant, then moved to NY. Grant vests after the move. As a New York resident on the vest date, you’re generally taxed by New York on income received while resident, which can mean the whole vest, including the part earned in Florida.

Florida has no income tax, so there’s nothing to credit. Moving into a high-tax state before a large vest can cost more than people expect; get advice before timing a move around vests.

Scenario 4 — NJ / NY Overlap

Live in New Jersey, work for a NY company

New York taxes the income from days you work in New York (and, under its convenience rule, possibly remote days too). New Jersey taxes all your income as a resident but gives a credit for the tax paid to New York, capped at the New Jersey tax on the same income. Net effect: you generally pay the higher of the two states’ tax on that income, not both in full.

The states you need to know about

Not all states treat RSU source income the same way. Here are the most consequential ones for remote tech workers.

State	Income Tax	Sourcing Aggressiveness	Key Risk for Remote Workers
California	Up to 13.3%	Very High	Taxes the California-workday share of every vest, even after you move; nonresident return (Form 540NR) required when you have California-source income above the filing threshold
New York	Up to 10.9%	Very High	Convenience-of-employer rule can tax 100% of remote income as NY-source; NYC local tax adds further layer for city workers
New Jersey	Up to 10.75%	Moderate	Credit for tax paid to NY is capped at the NJ tax on the same income, so you pay the higher of the two
Washington	0% income tax	Low	No tax on wages in 2026–2027; capital gains tax (7%, 9.9% above $1M) on long-term gains above $278k (2025) applies to later share sales, not RSU income; a 9.9% tax on household income above $1M is scheduled from 2028 (repeal vote Nov 3, 2026)
Texas / Florida / Nevada	0%	None	No sourcing claim — but offer no credit relief from other states’ sourcing claims on pre-move equity
Oregon	Up to 9.9%	Moderate-High	Source-state rules apply; high marginal rate compounds the federal withholding gap significantly

The convenience-of-the-employer rule

This is the rule that surprises remote workers the most.

New York, Delaware, Nebraska and Pennsylvania, and in some cases Connecticut and New Jersey, maintain that if an employee works remotely from another state for their own convenience — not because the employer mandates it — the income is treated as earned in the employer’s state, not the employee’s actual work location.

New York Convenience Rule — Still in Effect

The rule has survived legal challenges, including during the pandemic. It generally applies when your job is based at a New York office and you choose to work elsewhere; if your employer requires you to work outside New York, those days aren’t New York days. For RSU purposes: if your role is attached to a New York office and you work remotely from another state by choice, your RSU income may be treated as largely New York-source. If payroll doesn’t withhold New York tax, the liability shows up at filing.

What your employer’s payroll system actually does

Most employer payroll systems are configured to withhold based on the employee’s address on file. If you live in Texas and your address is Texas, Texas withholding happens — which for Texas means zero, because there’s no income tax.

Some large employers track work locations and withhold for several states. Many payroll systems, though, don’t:

✗

Calculate multi-state allocation for your RSU grant

Apportionment based on days worked in each state during the service period is not a payroll system function. It requires manual calculation by you or your CPA.

✗

Withhold California tax after you’ve moved to Texas

When your address changes, California withholding often stops, even though part of future vests is still California-source income. If it isn’t withheld, the balance is due when you file.

✗

Account for the New York convenience-of-employer rule

If you’re remote from a no-tax state but your employer has a New York office, payroll generally doesn’t flag or withhold for New York unless you proactively request it.

✗

Issue two-state withholdings on a single vest event

Even where the correct allocation would split a vest between two states, payroll systems are not built to route withholding to two nonresident states from one transaction.

Your Federal Gap Is Separate From This

The 22% federal shortfall exists regardless of which state you’re in

Multi-state sourcing determines which state taxes you. But the federal withholding gap — broker withholds 22% flat while your true marginal rate may be 32%–37% — applies to every RSU vest regardless of where you live. VestingGap calculates that federal gap instantly, along with the single-state rate comparison for your current state.

Open Calculator →

The apportionment calculation: how to actually do it

For a straightforward two-state situation, here’s the mechanics.

Step 1

Identify the service period

Grant date to vest date for each individual tranche. For quarterly vesting, each quarterly vest has its own service period and its own apportionment calculation. A grant issued January 1, 2023, vesting quarterly — the first quarterly vest has a 90-day service period. The final vest four years later has a 1,460-day service period.

Step 2

Count workdays in each state during the service period

This requires actual records — calendar entries, work logs, or credible reconstruction. Business travel complicates it. If you were physically in California for three weeks on a business trip during the service period, those days may count as California workdays even if you were technically a Texas resident.

Step 3

Compute the fraction

Workdays in State A ÷ total workdays in the service period = State A’s allocation fraction. Multiply that fraction by the vest value to get State A’s sourced income. Repeat for each state with days in the service period.

Step 4

Determine each state’s tax on its sourced income

The sourced income is typically added to your other income, and the state applies its brackets to the total to determine the effective rate, then applies that rate to the sourced portion. California does this. New York does this. The mechanics vary slightly by state and must be computed on the nonresident return for each applicable state.

Step 5

Check for resident-state credits

If both states have an income tax, you may be entitled to a credit in your resident state for taxes paid to the nonresident state. This reduces double taxation but rarely eliminates it. The credit is capped at the resident state’s rate on that income — not the nonresident state’s rate. Computed on your resident state return after the nonresident return is complete.

What to do before your next vest

The time to address remote RSU tax issues is before the vest, not after.

✓

Know your service period and where you worked

For every unvested grant you hold, calculate the days you worked in each state from grant date to today. Estimate where you’ll be working on future vest dates. This tells you which states have sourcing claims and roughly how large those claims are.

✓

Update your estimated payments to each applicable state

If your employer withholds only for your current state, and you have sourcing obligations to a prior state, make quarterly estimated payments directly to that state. California and New York quarterly deadlines: April 15, June 15, September 15, January 15.

✓

Tell HR if you need payroll adjustments

Some employers will accommodate voluntary additional withholding to a nonresident state — request this through payroll. It requires your employer to be registered in that state for payroll purposes, which is often the sticking point for fully remote companies.

⚠

Get a multi-state CPA before you move, not after

Moving from a high-tax state to a no-tax state sounds like a clean equity tax win, but the tax savings are often smaller than expected because of sourcing rules on equity granted before the move. A CPA who specializes in multi-state taxation can model the actual expected savings and flag California residency audit risks before they happen.

⚠

Keep records of your physical location

Credit card receipts, travel records, hotel bookings, and calendar entries are evidence of where you worked on any given day. For employees who travel frequently or split time across states, these records become critical if any state revenue department audits the allocation.

A concrete example: the CA → TX move across a four-year grant

Seattle-HQ Company 4,000 shares granted Jan 1, 2023 25% per year vest schedule SF resident until the Jan 2025 vest → Austin$200k salary · single

Vest Event	CA Apportionment	Vest Value	CA-Source Income	CA Tax Owed	CA Withheld	Gap
Jan 1, 2024 (Year 1)	100%	$120,000	$120,000	~$11,160	$12,276 (resident, 10.23%)	+$1,116
Jan 1, 2025 (Year 2)	100%	$125,000	$125,000	~$11,625	$12,788 (resident, 10.23%)	+$1,163
Jan 1, 2026 (Year 3)	≈66.7%	$130,000	$86,667	~$7,125	$0 (TX payroll)	−$7,125
Jan 1, 2027 (Year 4)	≈50%	$135,000	$67,500	~$5,560	$0 (TX payroll)	−$5,560

Total CA Tax Across Grant

~$35.5k

Owed to California across four vesting years — significant even after the move to Texas

CA Tax with Zero Withholding

~$12.7k

The portion owed to CA after employer switched to TX payroll — arrives at filing as balance due on nonresident return

TX State Tax Saved

Texas has no income tax — but offers no relief from California’s sourcing claim on the pre-move grant period

Assumptions: a $200,000 salary each year, 2025 California brackets, workdays assumed evenly spread. As a resident, California taxes the vest at your marginal rate (9.3% here). As a nonresident, California applies your average California rate on your total income (about 8.2% here) to the California-source share. Figures are estimates. The critical takeaway from this table: moving to Texas is not a full escape from California tax on equity granted while you were a California resident. The CA → TX move reduces the California claim over time as each new tranche’s service period includes more Texas days — but it takes the full remaining grant period to reach zero. A grant issued one year before moving still carries a California share on every later vest, shrinking over time (for example about 25% of a vest four years after the grant).

RSU Tax When You Work Remotely Across States