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RSU granted in MA but vested after I moved to CA. I am taxed by both states.

Forum|Forum|4 years ago
March 7, 2022
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I moved from MA to CA in June 2021. Some of my RSU vested after I moved.

My paycheck and w2 shows that I payed taxes to both state.

CA treated 100% of vested RSU as income.

MA treated a portion of it as income. (My employer told me that was because those RSU were granted in MA)

I think I am a part-year resident in MA. According to this page from mass.gov:

Part-year residents - Include gross income from all sources during your residency period.
Nonresidents - Include gross income from sources in Massachusetts.

I have three questions:

Does that mean the RSU income after I moved out of MA in 2021 should not be taxed by MA?
My paycheck shows that in 2022 (I am a CA resident), vested RSU are still being taxed by MA. Is that because those RSU are considered from "Massachusetts source"?
How do I prevent myself from being double taxed? For 2021, can I just remove those RSU income from MA gross income? For 2022, should I get tax credit from CA for the RSU taxes I paid to MA?

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Best answer by MAK70

1. The RSUs are Massachusetts-source income so it will be taxed if you are a resident or nonresident.

Massachusetts gross income includes income from sources within Massachusetts. It specifically includes income gained from or connected with any trade or business, whether or not you were actively engaged in a trade or business or employment in Massachusetts in the year you received income from:

Stock options (nonqualified) granted or connected to employment, or to conducting a trade or business in Massachusetts
Stock ownership as part of compensation for personal services in Massachusetts

2. You will have to file 2022 nonresident Massachusetts tax return for the RSUs.

3. You will be able to take a "credit for taxes paid to another state" in California. NOTE: For 2021, you will have to determine the amount that vested after you moved to California- this will be the Massachusetts nonresident income for the year and the amount you will indicate as the California income taxed by both states.

M

MAK70Answer

1. The RSUs are Massachusetts-source income so it will be taxed if you are a resident or nonresident.

Massachusetts gross income includes income from sources within Massachusetts. It specifically includes income gained from or connected with any trade or business, whether or not you were actively engaged in a trade or business or employment in Massachusetts in the year you received income from:

Stock options (nonqualified) granted or connected to employment, or to conducting a trade or business in Massachusetts
Stock ownership as part of compensation for personal services in Massachusetts

2. You will have to file 2022 nonresident Massachusetts tax return for the RSUs.

3. You will be able to take a "credit for taxes paid to another state" in California. NOTE: For 2021, you will have to determine the amount that vested after you moved to California- this will be the Massachusetts nonresident income for the year and the amount you will indicate as the California income taxed by both states.

J

JuiceKingAuthor

For anyone who has similar situation. You also need to file Schedule R/NR besides Form 1-NR/PY according to this page about residency status. Schedule R/NR says:

"If you received Massachusetts source income before or after you became a Massachusetts resident for part of the year and your gross income exceeded $8,000 for the year, you must file a Form 1-NR/PY as both a nonresident and part-year resident."

So my assumption in Question 1(part-year resident does not pay tax after residency ended) was incorrect.