RSU Taxes When You Move States: CA & NY Sourcing Rules

Which State Taxes My RSUs If I Moved?

If you receive Restricted Stock Units (RSUs), stock options, or other forms of deferred compensation, and you live or work in multiple states, determining how much of that income is taxable in each state is a high-stakes calculation. State revenue departments are increasingly aggressive in pursuing their share of this high-value compensation, especially as remote and mobile executive roles become the norm.

Across almost all states with an income tax, the fundamental question is: Where were the services performed that earned this compensation? Because RSUs often vest over several years, the services earning that stock may have been performed in multiple jurisdictions. To divide this income equitably, states use an apportionment formula.

How Is RSU Income Split Between States?

The default rule utilized by nearly all state tax authorities (including California, New York, and Massachusetts) is the workday ratio (or duty-day method).

Under this method, the taxable portion of the RSU income in a specific state is determined by a fraction based on the period between the grant date and the vest date:

• Numerator: The number of days worked in that specific state during the allocation period. In most states this means days you were physically present and working there — but see the convenience-rule warning below, which changes the answer in New York and several other states.
• Denominator: The total number of working days everywhere during that same period.

The Allocation Period & the Stuckless Precedent: Historically, defining the allocation period was highly contested. In the landmark New York case Matter of Stuckless (2006), the Tax Appeals Tribunal rejected the state's attempt to use a "grant-to-exercise" period for taxing a nonresident's stock options. In response to this ruling, New York codified formal regulations (20 NYCRR § 132.24), standardizing the grant-to-vesting period as the default window for apportioning stock options, restricted stock, and stock appreciation rights. Today, most states follow this grant-to-vesting standard.

The Denominator Nuance: It is critical to understand how the denominator is calculated. Some states allow for the exclusion of weekends, holidays, and sick days from the denominator, while others may default to total calendar days if your records are unclear. A denominator that includes only "working days" rather than "calendar days" can significantly shift the percentage of income allocated to a state. Without a meticulous daily log that distinguishes between working days, travel days, and personal days, an auditor will likely default to the formula most advantageous to the state.

Do I Still Owe My Old State After I Move?

Many taxpayers mistakenly believe that once they move out of a high-tax state, their tax liability to that state ends. For RSU holders, this is a dangerous assumption. States maintain trailing liability: when units vest years after you have relocated, your former state of residence will look back at the entire vesting period. If you worked in that state during any portion of the grant-to-vest period, they will demand their proportional share.

If you stop tracking your locations the moment you move, you lose your ability to accurately calculate the denominator for those later years, making it impossible to defend your apportionment when the tax bill finally arrives years later.

Can I Argue the Workday Formula Is Unfair?

The workday ratio treats every day in the allocation period as equal. When a stock price rises sharply late in the vesting period — after you have already left the state — a mechanical day count can pull that post-departure appreciation back into the former state's tax base. Taxpayers have argued this is inequitable. So far, they have lost.

In Appeal of Prince, the taxpayer began working for his California employer in 2007, moved abroad and became a California nonresident in 2010, and held six RSU grants made between 2007 and 2010 that all vested in 2012. The shares had appreciated dramatically between his departure and the vest date, so the grant-to-vest day count allocated a large share of that later gain to California.

He proposed two alternatives: valuing the RSUs at the share price on the date he left California, and an annual appreciation method. The Franchise Tax Board rejected both, and the Office of Tax Appeals affirmed the FTB's grant-to-vest workday allocation.

Alternative apportionment remains theoretically available where a taxpayer can show the standard formula does not fairly reflect where the income was earned. But the burden is heavy, the authority is thin, and Prince is a caution rather than a roadmap. Plan on defending the workday ratio, not escaping it.

Does My Nonresident Spouse Owe Tax on My RSUs?

Another major risk for mobile executives holding stock options or RSUs is the interaction between community property laws and nonresident sourcing rules. This was the central issue in the California Office of Tax Appeals (OTA) precedential decision, Appeal of Cremel and Koeppel (2021).

In Cremel-Koeppel, a husband was granted nonqualified stock options and RSUs while working and living in California. He later exercised/vested these options, and because they were married, the equity income was community property. When his nonresident wife received her one-half community property share of the income, the couple argued that since she was a nonresident of California, her portion should not be subject to California state income tax.

The Office of Tax Appeals rejected this argument. The OTA ruled that California taxes community property income based on its source. Because the options and RSUs were earned through services performed in California, the income retained its California source, making 100% of the equity compensation taxable by California—including the nonresident spouse's half-share. This decision makes it clear that community property divisions do not shield nonresident spouses from trailing state tax liabilities on equity compensation earned in high-tax states.

What Evidence Do Auditors Accept?

States presume the standard workday ratio is the most reasonable method. If you wish to deviate from it to optimize your tax position, the burden is entirely on you to provide clear and convincing evidence that the standard formula is unfair.

Auditors do not accept "reconstructed" calendars or "best-guess" estimates. In a residency or apportionment audit, authorities routinely request:

• Cell phone carrier records (tower data);
• Credit card and bank statements showing point-of-purchase locations;
• Travel receipts, boarding passes, and corporate "swipe card" logs.

The most powerful defense is a contemporaneous, GPS-verified log. A log that is created automatically as the days occur carries substantially more weight than a spreadsheet created three years later in response to an audit notice.

Intersection with Special Accrual Rules

For residents of certain states, such as New York, the apportionment of RSUs is further complicated by Special Accrual rules. When a resident changes their domicile, New York may require the "accrual" of certain types of income—including deferred compensation—to the resident period, even if the payment is received later. Navigating the intersection of RSU apportionment and special accrual requires a sophisticated understanding of both sets of rules.
Read more about the New York Special Accrual Rule here.

The Foundation for Optimization: Data is King

Whether you accept the baseline workday ratio or attempt a complex alternative apportionment argument based on changing roles and stock valuations, you cannot optimize what you do not track.

If you lack basic daily location logs to prove exactly when and where you worked during every phase of a multi-year vesting period, your tax strategy will fail. Meticulous day tracking is not just a "good habit"—it is the absolute foundation upon which all RSU tax apportionment and audit defense is built.

Conclusion

Apportioning RSUs and deferred compensation across multiple states requires navigating complex rules. The standard workday ratio is the baseline, but alternatives may exist for executives whose roles and stock values change dramatically. However, no tax strategy can survive without rock-solid evidence of your location history over the multi-year vesting periods.

Download the Domicile365 App to create an automatic, defensible, GPS-based log of your days across all jurisdictions. Signup for a free 60-day trial to start building your foundation for equitable tax apportionment today.