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 applies 14-day rule + 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 14-day rule
NY uses a bright-line: fewer than 14 workdays in NY during the grant-to-vest period excludes NY entirely. At 14 days or more, NY taxes its workday-fraction. File Form IT-203 as a non-resident if NY is at or above the 14-day threshold.
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).