Tax Planning

Moving from California with Startup Equity

California uses source-based taxation to tax equity compensation earned while you were a resident, even after you move. The tax allocation depends on the type of equity and the ratio of California work days to total work days during the relevant period.

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California Source-Based Taxation

California taxes equity compensation based on where the services were performed
Tax allocation uses the ratio of CA work days to total work days during the relevant period
This applies even after you have established residency in another state
The relevant period and allocation method differ by equity type (NSOs, ISOs, RSUs)

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California Source-Based Taxation

California taxes equity compensation based on where the services were performed
Tax allocation uses the ratio of CA work days to total work days during the relevant period
This applies even after you have established residency in another state
The relevant period and allocation method differ by equity type (NSOs, ISOs, RSUs)

Stock Option Allocation (NSOs)

California taxes NSO income based on the grant-date-to-exercise-date work allocation
Allocation = (CA work days / total work days) from grant to exercise
Working outside California after the grant reduces your CA allocation proportionally
The ordinary income at exercise is subject to CA tax based on this allocation ratio

ISO and AMT Considerations

ISO exercise creates an AMT preference item, not ordinary income
California AMT adjustment uses the same grant-to-exercise allocation as NSOs
A qualifying disposition (hold 2+ years from grant, 1+ year from exercise) avoids ordinary income
Disqualifying dispositions create ordinary income subject to CA source-based allocation

RSU Vesting Allocation

Each RSU vest is taxed based on the grant-date-to-vest-date work allocation
Allocation = (CA work days / total work days) from grant to that specific vest date
Multi-year vesting schedules mean each vest can have a different CA allocation
Capital gains from selling vested RSU shares are generally sourced to your state of residence at sale

Multi-State Tax Credits

Your new state of residence generally allows a credit for taxes paid to California
Moving to a no-income-tax state (TX, WA, FL, NV, etc.) maximizes post-move savings
Credits may not fully offset if your new state has different income categories or limits
Document your move date, domicile establishment, and CA ties carefully to prove residency change

Key Takeaways

California source-based tax follows your equity compensation regardless of where you move
The longer you work outside California before exercising or vesting, the lower your CA allocation
Time equity events strategically around your move to minimize combined state tax burden
Consult a tax advisor experienced in multi-state equity compensation before making major moves

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The information above is for educational purposes only and does not constitute investment advice, a recommendation, or a solicitation to buy or sell any security. Any historical figures are for illustration only, and past performance does not guarantee future results. Tax laws, regulations, and contribution limits change frequently, the details here may become outdated. Individual circumstances vary. Consult a qualified financial advisor, CPA, or attorney for guidance specific to your situation. Rubric Advisors is registered with the California DFPI; registration does not imply a certain level of skill or training.

Moving from California with Startup Equity

California Source-Based Taxation

Stock Option Allocation (NSOs)

ISO and AMT Considerations

RSU Vesting Allocation

Multi-State Tax Credits

Key Takeaways

California Source-Based Taxation

Stock Option Allocation (NSOs)

ISO and AMT Considerations

RSU Vesting Allocation

Multi-State Tax Credits

Key Takeaways

Related Topics

529 Plan Tax Strategies

Active Income vs Passive Income

Alternative Minimum Tax (AMT) Planning

Moving from California with Startup Equity

California Source-Based Taxation

Stock Option Allocation (NSOs)

ISO and AMT Considerations

RSU Vesting Allocation

Multi-State Tax Credits

Key Takeaways

California Source-Based Taxation

Stock Option Allocation (NSOs)

ISO and AMT Considerations

RSU Vesting Allocation

Multi-State Tax Credits

Key Takeaways

Related Topics

529 Plan Tax Strategies

Active Income vs Passive Income

Alternative Minimum Tax (AMT) Planning