Stock Options and Deferred Pay After Moving States
Workday allocation of equity, why your old state still taxes part of it, and deferred pay
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
Moving to Florida doesn't fully free stock options, RSUs, or deferred compensation from your former state's tax. Most states allocate equity compensation by workdays: the share of the grant-to-vest period you worked in the state is taxable there, even if you exercise or vest after becoming a Florida resident. Deferred compensation follows the same logic unless federal law protects it.
On this page
Allocation by type (varies by state)
| Compensation | Typical allocation for a former resident |
|---|---|
| Nonqualified stock options | Workdays in the state between grant and vesting (New York); some states, including California, use grant to exercise |
| Incentive stock options | Taxed on a disqualifying disposition, allocated similarly; regular ISO gain on a qualifying sale often follows domicile |
| Restricted stock units | Workdays in the state between grant and vesting |
| Bonuses | Workdays in the period the bonus was earned |
| Nonqualified deferred compensation | Sourced to where earned — unless paid over ten or more years or for life (the pensions guide) |
An example
An executive granted RSUs that cliff-vest after four years, who works the first three years in New York and the last in Florida, owes New York tax on about three-quarters of the RSU income at vesting (New York workdays over total workdays from grant to vest) — even though she's a Florida resident when it's paid. New York's convenience rule can add remote days to the New York share (the convenience rule guide).
Records
Grant agreements, vesting schedules, and a workday log by state for the whole allocation period (grant to vest, or grant to exercise for options in states like California); the employer's payroll may not allocate correctly, so the nonresident return often corrects it.
Frequently asked questions
Do I owe my old state tax on stock options exercised after moving?
Usually, for the share of the allocation period you worked there — grant to vest in New York, grant to exercise in California.
How are RSUs taxed after a move?
Allocated by workdays between grant and vesting — the former state taxes its share.
Is deferred compensation taxable after I move?
Only if it isn't protected by federal law (ten-year or lifetime payment schedules, and excess-benefit plan payments, are protected).
What records do I need?
Grant and vesting schedules plus a workday log by state.
Official sources
The New York State Department of Taxation and Finance's audit guidelines state: “The domicile audit continues to determine if the taxpayer has demonstrated with clear and convincing evidence that he has effected a genuine change of domicile or was never domiciled in New York State. The statutory resident audit explores the taxpayer's records to determine the total number of days present in New York State.” — New York State Department of Taxation and Finance, Nonresident Audit Guidelines (December 2021), https://www.tax.ny.gov/pdf/2021/misc/nonresident-audit-guidelines-2021.pdf
Federal law provides: “No State may impose an income tax on any retirement income of an individual who is not a resident or domiciliary of such State (as determined under the laws of such State).” — U.S. Government Publishing Office, United States Code, 2024 Edition, Title 4, Section 114 — Limitation on State income taxation of certain pension income, https://www.govinfo.gov/content/pkg/USCODE-2024-title4/html/USCODE-2024-title4-chap4-sec114.htm
Next step
Fairlight Accounting is a cross-border accounting and tax practice with a U.S. Tax Desk and a Canadian Tax Desk. Our U.S. Tax Desk handles equity compensation allocation, workday reconstruction, and nonresident returns correcting employer payroll allocations. See pricing or book a call.
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