Curated by: Rubric Advisors
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.
Moving from California with Startup Equity
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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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