Moved From California to Texas? Your Old RSUs May Still Create a Tax Bill

California – Moving from California to Texas can end California tax on much of your future non-California income, but it does not automatically cut California off from restricted stock units you earned partly while working in the state.

The California Franchise Tax Board says a nonresident can still owe California tax on RSU compensation to the extent the underlying services were performed in California between the grant date and vesting date. Its 2026 Residency and Sourcing Technical Manual specifically says California taxes RSU wage income for nonresidents based on the portion of services performed in California during that period.

That means an employee can move to Texas, become a California nonresident, receive RSUs months later and still have part of that compensation treated as California-source income.

Moving Does Not Erase Where the RSUs Were Earned

The issue turns on the source of the compensation, not simply where you live on the day the RSUs vest.

California residents are generally taxed on their income regardless of source, while nonresidents remain subject to California tax on income sourced to California. For equity compensation, California looks at where the employee performed the services that produced the compensation. The FTB’s equity compensation guidance explains that California continues to tax compensation attributable to California services even after the employee becomes a nonresident.

RSUs are especially important because they often vest over several years.

An employee might receive a grant while working in San Francisco, spend part of the vesting period working in California, move to Austin and then have the award vest after becoming a Texas resident. The move changes residency. It does not necessarily change the source of work already performed.

California Uses the Grant-to-Vest Period

For a California nonresident, the FTB’s current technical guidance says RSU wage income is taxable by California to the extent services were performed in California from the grant date through the vesting date.

The FTB has also addressed the issue directly in Chief Counsel Ruling 2013-02. In that ruling, the agency said a reasonable allocation method is to compare California working days during the grant-to-vest period with total working days during the same period.

The basic calculation is:

California workdays ÷ total workdays × RSU compensation = California-source RSU income

The formula can make a large difference for someone who moves halfway through a multi-year vesting schedule.

A $100,000 RSU Example

Consider a hypothetical employee who receives RSUs while working in California. Assume the award produces $100,000 of taxable compensation when it vests.

During the relevant grant-to-vest period, suppose the employee worked 400 days for the employer. Of those days, 250 were worked in California before the move and 150 were worked in Texas afterward.

The California allocation would be:

250 ÷ 400 = 62.5%

Applied to the hypothetical $100,000 of RSU compensation:

$100,000 × 62.5% = $62,500

Under the FTB allocation approach, approximately $62,500 would be California-source compensation in this example.

The $100,000 award value and workday counts are hypothetical. The calculation applies the allocation method described in the FTB’s official RSU sourcing ruling. The employee’s actual California tax would depend on the rest of the taxpayer’s return and applicable California tax rules.

Why Texas Residency Does Not Cancel the California Portion

Texas currently has no personal state income tax, according to the Texas Economic Development Office.

That can make a move from California financially significant, but it does not give Texas control over income that California law treats as compensation for services previously performed in California.

The two questions are separate.

Your current residence helps determine how you are taxed as a resident. The source of the RSU compensation determines whether California can continue taxing a portion after you leave.

For an employee whose entire grant-to-vest work period occurred in Texas after leaving California, the result can be very different from someone who spent most of that period working in California.

The Vesting Date Still Matters

The FTB’s current manual treats restricted stock and RSUs as wage income when the compensation becomes taxable and separately explains how that income is sourced when the taxpayer is a California nonresident.

For a nonresident, California does not simply tax the entire award because the RSUs were originally granted while the employee lived there.

Instead, the state looks at the portion tied to California services. That distinction matters for employees who leave early in the vesting period. Suppose two workers receive identical four-year RSU grants in California.

One moves to Texas after three months. The other moves after three years.

If their work patterns otherwise satisfy the FTB allocation method, the second employee could have a much larger portion of the eventual vesting income sourced to California because more of the grant-to-vest services were performed there.

Working in California After the Move Can Also Matter

Changing residency does not necessarily mean California workdays stop forever. A Texas resident who returns to California for work during the grant-to-vest period may add California service days to the sourcing calculation.

The FTB’s sourcing rule focuses on where the services were actually performed, not merely the employee’s mailing address. Its current manual says compensation must be allocated to California when services were performed both inside and outside the state.

That makes work-location records valuable for employees with large unvested awards. Travel calendars, payroll records, employer work-location data and vesting schedules may become important when determining the correct allocation.

What if All the Work Was Done in California?

The exposure can be much larger if the employee completed all the services connected with the award before leaving California.

The FTB’s equity-compensation publication gives examples in which an employee leaves California before the equity becomes taxable but the compensation remains California-source because all of the related services were performed in California.

The principle is straightforward.

Moving before the payment or vesting event does not necessarily convert compensation earned from earlier California work into Texas-source income. For RSUs, the exact vesting conditions and service period need to be examined.

Selling the Shares Later Is a Different Tax Event

The compensation created when RSUs vest should not be confused with a later gain or loss from selling the shares.

California’s sourcing rules distinguish compensation for services from gains on intangible property. Its equity-compensation guidance repeatedly treats the wage component and subsequent capital gain component as separate items when a taxpayer has changed residency.

For someone who is a bona fide California nonresident when shares are later sold, the sourcing analysis for the post-vesting investment gain can therefore differ from the analysis applied to the original RSU wage income.

That distinction matters because a person can have California-source compensation from old RSUs even though a later increase in the share price may not be California-source income.

The facts of the transaction still matter, particularly if the taxpayer has retained California residency, conducts business in California or falls under another California sourcing rule.

Your Move Date Has to Hold Up

The entire analysis assumes the person actually became a California nonresident. Simply renting an apartment in Texas or changing a mailing address does not by itself settle California residency.

The FTB evaluates residency based on the taxpayer’s facts and circumstances. Its residency guidance for part-year residents and nonresidents distinguishes people who leave California permanently from those who remain residents or are outside the state only temporarily.

For someone with substantial equity compensation, the residency date can therefore be just as important as the RSU allocation itself. A disputed move date can change how much income California treats as taxable.

You May Still Need a California Return

A former California resident with California-source RSU income may still have a California filing obligation.

The FTB’s Form 540NR instructions direct nonresidents and part-year residents to use Form 540NR and explain the filing rules for people receiving California-source income.

That means moving to Texas does not necessarily mean the last California tax return you file is the return covering the year you moved.

If old RSUs vest later and part of the income remains California-source, another California nonresident return may be required depending on the taxpayer’s filing thresholds and overall tax situation.

Employer Withholding May Not Tell the Whole Story

Employees should not assume that the state withholding shown on a vesting statement proves the final California tax treatment.

The sourcing calculation depends on the employee’s work history during the relevant period. California’s Chief Counsel RSU ruling bases the allocation on California working days compared with total working days during the applicable service period.

An employer may have information about work locations, but the taxpayer is still responsible for reporting the return correctly. For someone with several RSU grants, each vesting tranche can also have a different grant date, vesting date and California workday ratio.

One percentage should not automatically be applied to every award.

The Earlier You Move, the Allocation Can Change More

A move to Texas can reduce California exposure on RSUs that continue vesting after the move, but the effect depends heavily on timing. Consider a four-year grant.

If the employee spends nearly the entire service period in California and moves shortly before vesting, most of the compensation could remain connected with California work.

If the employee moves shortly after the grant and performs most later services in Texas, the California percentage could be much smaller. That is why the headline question cannot be answered simply by asking where the employee lived on vesting day.

The important record is the grant-to-vest work history.

What Former California Employees Should Verify

Anyone who moved from California with unvested RSUs should identify the grant date and vesting date for each award, then determine where the related services were performed during that period.

The FTB’s current sourcing manual is particularly important because its summary expressly states that a California nonresident’s RSU wage income is taxable by California to the extent services were performed in California between grant and vesting.

For someone who moved to Texas, the absence of a Texas personal income tax does not wipe away that California-source portion.

The figures can become substantial when several years of equity compensation are involved, so the move date, workday records and vesting schedule should be checked before the California return is prepared.