State tax on equity compensation
How different states tax RSUs and equity compensation, including state-specific considerations.
- •RSUs are taxed at your marginal income tax rate (not capital gains rate). Your employer typically withholds 22% federal (or 37% if over $1M) plus state tax and FICA.
- •State tax on RSUs depends on where you live and work when they vest. States without income tax (Texas, Florida, Washington) don't tax RSUs at the state level.
- •You typically receive 60-75% of RSU value after taxes, depending on your tax bracket and state.
- •Withholding on RSUs may not match your final tax liability—you'll reconcile this when you file your return.
State tax basics
Most states tax RSUs as ordinary income when they vest, using the same rates as regular wages. However, some states have special rules or exemptions for equity compensation.
Residency Matters
States without income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming) don't tax RSUs at the state level. You still pay federal tax and FICA.
High-tax states
States with high income tax rates (like California, New York, and New Jersey) can significantly reduce your take-home pay from RSU vesting. Combined federal and state tax rates can exceed 40% for high earners.
If you're considering a move, factor in state tax rates on equity compensation. Moving from a high-tax state to a no-tax state can save thousands of dollars on each vesting event.
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Multi-state considerations
If you work remotely or move states during the year, you may owe tax to multiple states on your RSUs. States typically tax income based on where you performed the work or where you were a resident when the income was earned.
Most states offer credits for taxes paid to other states to avoid double taxation, but the rules vary. Consult a tax professional if you have multi-state RSU income.
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