Sold RSU shares after moving states? Here’s why your former state may still tax the W-2 portion — and how capital gains are sourced separately.
Quick reference
- Former-state W-2 portion = workday-fraction times vest income
- CA uses FTB Pub 1004; NY sources by grant-to-vest workday fraction and you file IT-203
- Capital gains source to your sale-time state, not former state
- File non-resident return in any former source-rule state
- Resident-state credit usually offsets former-state tax (avoids full double-tax)
The two-bucket framework
RSU sale income splits into two distinct tax buckets:
- W-2 portion — equals vest-date FMV. This was already reported as ordinary income on your W-2 in the year of vest, and is sourced to each state by workday-fraction. Source-state tax persists after you move.
- Capital gains portion — equals (sale price minus vest-date FMV). Sourced to your residence state at the time of sale. Federal long-term or short-term rates based on holding period from vest.
California after the move
CA FTB Publication 1004 codifies the workday-fraction allocation. If you worked 200 of 262 workdays in CA during the grant-to-vest period and then moved to Texas, 76.3% of vest income remains CA-sourced. You file Form 540NR as a non-resident for each subsequent year you sell shares attributable to that grant.
Common surprise: moving to a no-tax state does not eliminate the CA tax on the CA-portion. It only changes future ordinary-income sourcing for new grants and the capital-gains side at sale.
New York — and what the 14-day rule actually does
NY sources the W-2 portion by the grant-to-vest workday fraction under 20 NYCRR §132.24. File Form IT-203 as a non-resident for any year with NY-source RSU income.
The “14-day rule” is widely misread as a de minimis exemption. It is not. TSB-M-12(5)I is a withholding policy: an employer that reasonably expects a non-resident to work 14 days or fewer in NY will not be penalised for failing to withhold. The memo says in terms that it “does not relieve a nonresident who works 14 days or fewer in New York State from the requirement to file a New York State personal income tax return and to report his or her New York wages.” The income stays NY-source and reportable either way.
Two further points specific to RSUs. First, the 14-day rule expressly does not apply to “compensation paid in one year that is related to services performed in a prior year… deferred compensation and compensation from nonstatutory stock options” — trailing equity income is exactly that category, so even the withholding relief is unavailable. Second, if the employee in fact works more than 14 days in NY, the employer must withhold on all NY wages paid after the 14th day.
Resident-state credit
Most resident states (CA, NY, NJ, etc.) provide a credit for tax paid to another state on the same income (Form 540 Schedule S in CA, IT-112-R in NY, etc.). This typically prevents full double-taxation but only up to the lower of the two states’ rates.
Capital gains state-sourcing
Capital gains between vest and sale source to your sale-time residence — not your former state. Holding period starts at vest, so a sale within 12 months of vest is short-term (taxed as ordinary income at the federal level).