Award-winning global customer service.
★★★★★ 5/5
Dimov Tax is rated 5 stars on all major review platforms including Google, Yelp, Facebook, Angie’s List, Better Business Bureau, TaxBuzz, Thumbtack, Upwork, Bark, and much more.

When it comes to stock-based compensation, the tax implications can vary depending on your location and the type of stock option or plan you hold. If you’ve recently moved into or out of California/New York, understand how Non-Qualified Stock Options (NSOs), Incentive Stock Options (ISOs), Restricted Stock Units (RSUs), and Employee Stock Purchase Plans (ESPPs) are taxed in different scenarios is crucial. In this article, we’ll explore these tax considerations in an organized manner.
Non-Qualified Stock Options (NSOs)
Taxation on the Exercise Date:
Taxation on the Sale Date:
Incentive Stock Options (ISOs)
Taxation on the Exercise Date:
Taxation on the Sale Date (Qualifying Disposition):
Taxation on the Sale Date (Disqualifying Disposition):
Restricted Stock Units (RSUs)
Taxation on the Vesting Date:
Taxation on the Sale Date:
Employee Stock Purchase Plans (ESPPs)
Taxation on the Sale Date (Qualifying/Disqualifying Disposition):
New York’s tax regulations and requirements for the allocation of equity income are similar to those in California but with specific nuances. In addition to the standard allocation procedures, New York offers Form IT-203F Multi-Year Allocation for situations that involve certain income related to professions, occupations, and compensation from equity-based instruments like stock options, restricted stock, and stock appreciation rights.
When dealing with equity income and relocating across state lines, understanding how state tax credits work is essential to mitigate potential double taxation. For example, RSUs are typically taxed upon vesting, and the taxation is usually based on the state of residence at the time of vesting. However, when relocating between states, the situation becomes more complex, particularly if RSUs have vested both before and after the move.
Let’s consider a scenario: You were a resident of California (CA) or New York (NY) when a portion of your RSUs vested, and then you relocated to a state with lower or no income tax. Now, a subsequent portion of your RSUs vests post-relocation. The question arises: How are the taxes on the newly vested RSUs determined?
In this case, your new state of residence may provide you with a credit for the taxes you paid to CA/NY on the RSUs that vested before your move. This credit helps to prevent the double taxation of the same income—once in the state where you originally earned it and again in your new state of residence.
For example, if you’re now a resident of New Jersey and you vest a portion of your RSUs post-relocation, New Jersey might allow you to claim a credit for the taxes you paid to CA/NY on the previously vested portion. This credit effectively reduces the tax from the RSUs in your new state.
It’s important to note that not all states have the same rules for granting tax credits, and some might have limits on the extent to which they can be claimed. Furthermore, some states may require you to provide documentation or proof of taxes paid to the source state. Given these variations, a thorough assessment of your unique circumstances is important to establish the most effective course of action.
Relocating between states while holding RSUs, ISOs, NSOs, or participating in an ESPP can lead to complex tax implications. Understanding how each type of stock-based compensation is treated in both your current and prospective state is crucial to making informed decisions and minimizing potential tax burdens. At Dimov Tax, we will provide you with the guidance needed to navigate these intricacies and ensure that your relocation doesn’t lead to unintended tax consequences. Simply reach out to us below to learn more about what you can do to minimize your tax liabilities.
Call us today at (833) 829-1120, email us at info@dimovtax.com, or fill out the form and we’ll get in touch immediately.
"*" indicates required fields
Dimov Tax is rated 5 stars on all major review platforms including Google, Yelp, Facebook, Angie’s List, Better Business Bureau, TaxBuzz, Thumbtack, Upwork, Bark, and much more.