A November move does not relocate ten months of wages. California taxes its residents on all of their income and nonresidents only on income from California sources, so a move into or out of California during the year usually means a part-year California return, and often a return in the other state as well. Reviewing those questions before a move gives you time to gather the right records. Reconstructing it afterward is much harder.
Residency: when you became a resident
Residency turns on more than a new address. States look at where you live and work, where your family is, where you keep your home and where your connections are. The date you became a resident of the new state, and stopped being a resident of the old one, is a conclusion drawn from those facts, which is why ordinary records like leases, payroll and travel matter.
Sourcing: where the income was earned
Different kinds of income follow different rules. Wages generally follow where the work was done. Income from a business or rental property follows where it operates. Equity compensation is the classic surprise, and the rule depends on the award. For a nonresident, California generally allocates nonqualified stock option income over the period from grant to exercise, or to an earlier end of employment. Restricted stock unit income is generally allocated by California workdays from grant to vesting, and restricted stock income over the service period from grant or purchase to vesting, as FTB Publication 1004 describes. The share of that period worked in California is taxed there, even when the shares are exercised or vest after the move. Residency matters too: California taxes a resident on all income, so moving into California before an option is exercised or stock vests changes the analysis.
A large sale near a move deserves particular care. Gain on shares you bought is generally taxed by the state where you live when you sell, but states look closely at moves made shortly before a large sale, and income tied to earlier work can stay with the state you left.
One year, two states
Picture an engineer who works in California through June 2026, moves to Washington in July, and has restricted stock vest in October 2026. The wages through June are California income; the wages after the move generally are not, and Washington does not tax wages in 2026. The October vesting is split, with the part tied to the time worked in California still taxed there, even though the engineer lives in Washington when it vests. Getting that allocation right, and supporting the move date, is most of the work.
- Wages for work done while a resident of the first state
- Investment income received while a resident
- The part of an equity award earned during this period
- Wages for work done after the move
- Investment income received after the move
- Equity income that vests later can still be allocated to the first state for the work done there
The return follows the full calendar of where the household lived, worked and earned; the moving date is one entry on it.
Where we help
Ideally we map the year before the move: the dates, the income that straddles the move, and the records worth keeping. Where the answer turns on domicile or another legal question, we work alongside your attorney.
Sources
Talk to us before the move.
Tell us where you are moving, when, and what income may straddle the move. We can talk through the questions each state will ask and how to plan for them.
Contact our team