State tax trailing nexus
Also: state tax trailing nexus, trailing nexus, trailing state tax, equity trailing tax
A state's continued right to tax compensation earned while the taxpayer was a resident, even after the taxpayer has moved. Applies to deferred equity income such as RSU vests from pre-move grants.
Trailing nexus is the principle that a state retains the right to tax income tied to services performed while the taxpayer was a resident, even after the taxpayer moves to a new state. For equity compensation, the source state applies an allocation: the portion of each future vest attributable to workdays performed in the source state is taxable there. The result is that a California-to-Texas mover can still owe California tax on many years of RSU vests originating from pre-move grants.
Example: an engineer lives in California for all four years of a 2022 grant’s vesting period, then moves to Texas in 2024. At the 2025 vest, one year of the four-year grant accrued post-move. California taxes 75% of that vest; Texas taxes none of it. Over the life of the grant, California collects state tax on nearly all of it.
Common mistake: assuming a move terminates state tax exposure on all future vests. Only compensation attributable to workdays post-move escapes the source state.
State trailing nexus matters at relocation planning, in California / New York / New Jersey departures, and at tender offer or IPO lockup expiration for multi-state residents.