Multi-State Taxes: Who Taxes You When You Move or Work Remotely

Every state with an income tax taxes its residents on all of their income and nonresidents on the income earned there. The year you move, work remotely for an out-of-state office, or vest equity you earned somewhere else, two states can each claim part of the same paycheck.

• The move: you usually file a part-year return in both states, and leaving doesn’t end the old state’s claim until you’ve proved the move.
• The equity: RSUs are taxed by every state you worked in between grant and vest, wherever you live on the vest date.
• The credit: your home state’s credit for tax paid elsewhere prevents most double tax, but not all of it.

These rules tend to surface late: at filing time, when a vest lands on the wrong state’s line of your W-2, or in a letter from the state you left asking why you think you left it. Each section below covers one that costs real money if you find it out in April.

Which state taxes you if you move mid-year?

Both states do, for different slices of the year. The state you leave taxes all the income you earned while you lived there, plus anything sourced to it afterward, such as wages for days you worked there or a later vest of equity you earned there. The state you move to taxes everything from the day you arrive. California calls this a part-year return on Form 540NR; New York uses Form IT-203.

Two things about that part-year return tend to surprise people. The first is the rate. California doesn’t tax your California income at the rate that California income alone would carry. It figures the tax on your income from every source as if you had lived there all year, turns that into an average rate, and applies the rate to the California share, according to FTB Publication 1031. New Jersey does the same: nonresidents “calculate your tax on income from all sources as if you were a resident, and then prorate” it, in the words of its guide for part-year residents. A big year in your new state raises the rate your old state charges on its slice.

The second is the date. You stop being a resident when your domicile changes, and your domicile is the one home you intend to return to. New York says your domicile doesn’t change “until you can demonstrate with clear and convincing evidence” that you’ve abandoned it and set up a new one, and that “it is not enough simply to file a certificate of domicile or register to vote in the new location.” California treats someone domiciled there but away for a temporary purpose as still a resident, and weighs where your closest connections are, judging “the strength of your ties, not just the number.” A driver’s license and a lease in Austin don’t outweigh a house, a spouse and a doctor in Palo Alto.

What is statutory residency (the 183-day test)?

Statutory residency is a second way to be a full-year resident, without ever being domiciled in the state. In New York you are a resident if you keep a permanent place of abode there for substantially all of the year and spend 184 days or more in the state. Any part of a day counts as a day, and you don’t need to set foot in the apartment for the day to count. New York City applies the same test for its own income tax.

The trap is the person who moves to Florida but keeps the Manhattan apartment and still flies back for work. Domicile may well have moved. But 184 days in New York with a place to live there makes them a full-year New York resident anyway, taxed on all of their income, wherever it was earned. Massachusetts writes the same rule into its statute (a permanent place of abode plus more than 183 days, partial days included), and New Jersey’s version requires a permanent home and more than 183 days.

When two states both treat you as a full-year resident, the credit described below doesn’t fix it cleanly, because each state credits only income it considers earned in the other state. Dividends and gains usually belong to neither by that measure, so both states can tax them. A day-by-day log (calendar entries, card receipts, phone location history) is the only defense in an audit, and it is far easier to keep as you go than to rebuild.

Sources: New York Tax Department, FTB Publication 1031, New Jersey GIT-6, Mass. General Laws c. 62, § 1, 35 ILCS 5/1501, Washington Department of Revenue, and Connecticut’s Office of Legislative Research for the convenience rules.

Do you owe tax where your employer is or where you work?

In most states, where you sit while you do the work. California’s rule is typical: “compensation for services rendered by employees has a source where the services are performed,” per its Schedule S instructions. A Californian working remotely for a Chicago company owes Illinois nothing for days spent at a desk in Oakland.

A handful of states turn that around with a convenience of the employer rule, which taxes a remote employee’s home days as if they were worked at the employer’s office. New York’s is the one most people run into. If your primary office is in New York, the Tax Department counts your telecommuting days as New York days unless your employer has set up a bona fide employer office where you work, and “unless your employer specifically acted to establish” one, you keep owing New York tax on that income. A New York employee who moves to Vermont and keeps the same job can owe New York tax on nearly the whole salary.

Connecticut’s Office of Legislative Research counted at least seven states with a convenience rule as of May 2025: Alabama, Connecticut, Delaware, Nebraska, New Jersey, New York and Pennsylvania. Two of them apply it only in kind. New Jersey’s rule, in effect since 2023, reaches only residents of states that impose a similar test, “such as Delaware, Nebraska, and New York,” and Connecticut works the same way. Pennsylvania writes the rule into its regulations: days worked outside the state reduce your Pennsylvania wages only if your duties “of necessity” required you to be elsewhere. Nebraska narrowed its version starting in 2025 so that only pay for services performed in Nebraska counts, and only once you’ve worked there more than seven days.

The expensive part is what your home state does with it. Before 2019, Connecticut residents who paid New York tax under the convenience rule got no Connecticut credit for it, because Connecticut’s own rules said that work was done in Connecticut. Connecticut changed its law; not every state has.

How does the credit for taxes paid to another state work?

Your home state gives you a credit against its own tax for income tax you paid to another state on the same income. Two limits decide whether it makes you whole.

The credit is capped. California’s Schedule S allows “the smaller of” two amounts: the California tax on the double-taxed income, or the other state’s tax on it. You end up paying the higher of the two states’ rates on that income, never the lower.

The credit follows your home state’s sourcing rules, not the other state’s. California allows it “only on income which has a source within the other state,” and it applies “California’s nonresident sourcing principles… even though the results may be contrary to the other states’ principles,” per the Schedule S instructions. New York’s credit likewise covers only income “sourced to and taxed by” the other state. That is how convenience-rule wages and dual-resident investment income fall through: one state says the income is its own, the other disagrees, and nobody gives it up.

There is also a cash-flow cost even when the credit works. If your employer withholds for the wrong state, the money stays there until you file a nonresident return asking for it back, months after it left your paycheck.

What are reciprocal agreements between states?

A reciprocal agreement is a deal between neighboring states that each taxes only its own residents’ wages. Pennsylvania and New Jersey have one: a Pennsylvania resident working in New Jersey owes no New Jersey income tax on compensation, and the reverse holds too. Illinois has agreements with Iowa, Kentucky, Michigan and Wisconsin.

Two details matter. The agreements cover wages only, so self-employment income or a gain on property is still taxed where it is sourced. And payroll doesn’t apply them on its own: you give your employer the exemption certificate (Form NJ-165 for New Jersey, IL-W-5-NR for Illinois), or the work state keeps withholding and you file a nonresident return to get it refunded.

How are RSUs taxed when you vest across states?

RSUs are wages on the day they vest, and states source them to where you did the work that earned them, not to where you live on the vest date. California taxes RSU income “to the extent services were performed in California from the grant date to the vesting date,” according to FTB Publication 1004, and the method it describes is a ratio of workdays:

California workdays from grant to vest ÷ total workdays from grant to vest

So a grant made during your California years keeps paying California tax after you’ve moved. Here is how one vest splits.

An engineer, filing single, earns a $240,000 salary. Her employer grants her 1,000 RSUs on October 1, 2025, vesting in a single tranche on October 1, 2026. She moves from California to Texas on July 1, 2026, keeps the same job, and the shares vest at $200 each.

Now her 2026 California part-year return. California taxes her first-half salary as a resident and the RSU slice as California-source income, at the average rate on her income from all sources. The figures below use the 2025 California rate schedule and standard deduction from the Form 540 booklet, because 2026’s schedule hasn’t been published yet, and leave out exemption credits and federal tax.

At her 8.6% average rate, the RSU slice alone carries about $12,900 of California tax. Texas has no income tax, so there is nothing to credit it against. And the averaging method adds roughly $1,970 compared with taxing the $270,000 by itself, because her Texas months push the rate up.

Three practical points follow. If payroll switched her to Texas on July 1 and withheld no California tax on the October vest, the tax is still due with her return, so check before the vest, and see RSU tax withholding for how each vest is funded. Grants made after the move, for work done only in Texas, carry no California share. And her later gain on the shares follows where she lives when she sells: Publication 1031 says a gain on stock “has a source where you are a resident at the time of the sale,” so if she sells as a Texas resident, the gain since the vest isn’t California income.

Options work differently by state. For nonqualified options, California counts workdays from grant to exercise (or to the date you left the company, if earlier). New York’s regulation generally stops the clock when the option vests, so the same grant can be allocated over two different windows by two states. The RSU tax calculator estimates the federal side of a vest. If the equity pays out in a sale instead, Tender Offer Taxes and What Happens to Your Stock Options and RSUs in an Acquisition cover how that payout is taxed.

Does moving to a no-income-tax state end your old state’s claim?

Only for income you earn after you’ve genuinely moved, and only if the old state agrees you have. Nine states don’t tax wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Moving to one of them stops new wage tax going forward. It doesn’t touch equity earned before the move, real estate you still own in the old state (taxed where it sits), or the old state’s view of your domicile.

Residency is a question of fact, and the old state judges it by what you kept. California’s list of factors runs from where your spouse and children live and where your principal residence is, through your driver’s license, car registration and voter registration, to where your bank, doctors, dentist, accountant and club memberships are. New York looks at whether you’ve shifted “the focus of your life” to the new place. Keeping the old house “for now,” leaving your children in the old school district, or keeping your doctors and country club all argue that you never left. Washington is a partial exception to the no-tax label: its 7% capital gains tax applies to long-term gains above an annual deduction, and domicile decides who owes it on stock.

One rule runs the other way. Federal law bars a state from taxing retirement income of someone who is no longer a resident, which covers distributions from 401(k)s, IRAs and pensions. Once you’ve left, the old state can’t tax your withdrawals, even if you built the account while living there.

How many state returns will you file?

Count one return for each state that has a claim on some of your income for the year:

• a part-year return in each state you lived in, if it has an income tax;
• a nonresident return in each state you worked in, unless a reciprocal agreement covers you;
• a nonresident return in a state you left, if equity, a business interest or real estate still produces income sourced there.

The engineer above files one state return, California’s part-year 540NR, because Texas has none. A New Jersey resident who commutes to Manhattan files two: a New York nonresident return and a New Jersey resident return claiming the credit. Someone who moves from New York to California mid-year with a rental property in Massachusetts files three. The state income tax calculators show what each state takes from a paycheck, and the guide for people moving states covers the decisions to settle before the move itself. If the move also comes with a new job, RSUs vesting at two employers explains why both sets of withholding are likely to fall short.

Where Nino fits

Nino pairs AI-powered planning software with a dedicated CPA and Financial Planner who plan your move date, vests and home sale before they happen, allocate income between states, and prepare every state return. Essential covers federal and one state return, Plus covers up to three states, and Premier up to five; each extra state is $150. Plans start at $3,600 a year, with a quote before you join. See plans and pricing, or book a free consultation to map which states will claim your income this year.