Moving to Texas With RSUs: When California Stops Taxing Your Equity
She has been a VP of Engineering at the same public tech company for eight years. The grants stack up, quarter after quarter, and what started as a nice bonus has quietly become about $3.1 million of one stock. She and her family are planning the move to Frisco, Texas next spring. Better schools, more space, no state income tax. But there's a question she keeps coming back to: once we're in Texas, California can't tax our company stock anymore, can it?
The honest answer is: some of it, yes. Some of it, no. And the difference depends on when those RSUs were granted, when they vest, and which state you were standing in when they did.
Where the RSU Income Lives
California taxes income based on where you earned it. For RSUs, the rule is straightforward: the income is sourced to the state where you performed the work during the vesting period. The vesting period is the time between the grant date and the vest date. If you worked in California for part of that window, California taxes that portion.
Say you received a grant on January 1, 2024, and it vests over four years. Each tranche vests on January 1 of 2025, 2026, 2027, and 2028. If you move to Texas in March of 2027, the tranche that vests in January 2028 has a vesting period that runs from 2024 to 2028. California will still tax the portion of that vest that corresponds to the days you worked in California during that four-year window.
It is not a clean break. The move does not wipe the slate clean for grants that were already in motion.
The same principle applies whether you are heading to Texas or Florida. We covered the Florida angle in a previous post on moving to Florida with RSUs, and the mechanics are similar, but Texas has its own quirks worth understanding before you pick a destination.
The Grant That Keeps Paying California
This is the part that surprises most tech executives. The RSUs that were granted before you moved still have a California tax obligation after you leave. The formula works like this: the number of days you worked in California during the vesting period divided by the total days in the vesting period, multiplied by the value of the shares at vest.
A director who spends six years in California and then moves to Texas does not escape California tax on the shares that vested during those six years, even if the sale happens after the move. The sale itself is a separate event, and the gain from the sale is sourced to your new state. But the ordinary income at vest is a California event.
The FTB knows this. They have a dedicated unit that audits former residents, and RSU income is one of the first things they check.
What the FTB Looks For
When you file as a part-year resident or nonresident after a move, the FTB reviews the allocation. They look at where you were physically present on each vest date. They look at your days worked in California versus outside. And they look at the broader residency factors to make sure you actually left.
The checklist includes things like: where is your driver's license issued, where are you registered to vote, where do your children go to school, where is your primary home, where do you file your federal tax return, where do you spend the majority of the year. A Texas driver's license and a voter registration in Collin County carry more weight than a UPS store mailbox and a vacation home in Palm Springs.
The FTB has a 10-year lookback window for audits. They can review returns going back a decade if they find reason to. A move that is documented correctly is defensible. A move that is documented loosely is expensive.
Timing the Move Around Equity Events
When you move matters to the math. A move in March, right before a large vest in April, means the vest happens after you establish Texas residency. The days you worked in California during that vesting period still matter for the sourcing formula, but the vest itself occurs while you are a Texas resident, and the economic substance of the move is clearer.
A move in November, after most of the year's vests have already happened, means those vests are fully California-sourced. You are a California resident for almost the entire tax year. The state income tax savings for that year are minimal.
The most common approach we see is a spring or early summer move: enough time to establish residency before the bulk of the year's equity events, but not so rushed that the documentation is sloppy. A mid-year move creates a split-year residency return that splits your income into California-sourced and Texas-sourced buckets. With the right calendar and the right plan, the savings are substantial.
The Strategist Role: Before You Move
Most executives call their CPA after the move is done and say, "Here is what happened, file the return." The CPA files it. The allocation is whatever it is. The question of whether the move could have been structured differently is never asked, because by the time the conversation starts, the calendar has already made the decisions.
A strategist works the other direction. Before you give notice, before you list the house, before you pick the moving company, we model the tax impact of different move dates, different vest schedules, and different grant timing. We look at where each outstanding grant sits in its vesting schedule. We look at how a change in withholding elections could cover the California piece more cleanly. We look at the documentation checklist and make sure the paper trail is in place before you leave.
The difference is not in the forms. The difference is in the timing. A preparer fills out what happened. A strategist helps decide what will happen, and when.
If you are a tech executive in California with a seven-figure RSU position and a Texas move in the back of your mind, that is the conversation worth having before the calendar makes the decision for you.
Book a free 15-minute discovery call at (619) 280-2700 or email info@RoadmapTax.com. No forms, no commitment, just a conversation about what a planned move could look like for your situation.
FAQ
When do California taxes stop on my RSUs after I move to Texas?
They do not stop completely for grants that were awarded before your move. RSU income is sourced based on where you worked during the vesting period, so shares that vested while you worked in California are taxable there even if you sell them from Texas.
Does the FTB actually audit former residents who move to Texas?
Yes. The FTB has a dedicated former-resident audit unit, and RSU income is a common audit target. Proper documentation of your move, including driver's license, voter registration, and primary residence, is essential to defending your residency change.
Can I time my move to minimize California tax on RSUs?
A move earlier in the year, ideally before large vest dates, can reduce the California-sourced portion of your income. Modeling the timing around your specific grant and vest schedule is the most effective approach.
How does California calculate the tax on RSUs after I leave?
California uses a days-based sourcing formula: the number of days you worked in California during the vesting period divided by the total days in the vesting period, multiplied by the value of the shares at vest.
What documents should I keep to prove my Texas residency?
Driver's license, vehicle registration, voter registration, home purchase or lease agreement, utility bills, bank statements showing Texas addresses, and records of where you spend your time throughout the year. The more documentation, the stronger your case.
Do I need a CPA or a tax strategist for a move with RSUs?
A CPA can file the returns after the move. A tax strategist models the move before it happens, looking at grant schedules, vest calendars, and residency timing to help you choose the most advantageous approach. The two roles are complementary, but the strategist work happens first.
