What Texas residents actually pay
Texas has no state income tax on wages. That removes a layer — but federal AMT, federal capital gains, and the 3.8% Net Investment Income Tax still apply, and a prior state may still have a claim.
No state income tax; Austin is a top secondary hub after the 2020 migration wave.
Withholding gap
Federal supplemental-wage withholding on RSU vesting is flat — 22%, rising to 37% once year-to-date supplemental wages exceed $1M. If your actual marginal rate is higher, the shortfall shows up at filing. In Texas, layer on no additional state tax and model what you'll owe before year-end.
Sourcing when you move
If you earned part of a vesting tranche while in a different state, most high-tax states (California, New York, Massachusetts) use workday allocation between grant and vest. Your payroll will likely withhold only for your current state, so a manual true-up at filing is the rule, not the exception.
Frequently asked
- Does Texas tax RSU income the same as wages?
- Texas has no state income tax on wages, so RSU ordinary income is federal-only. Note that Washington residents still owe the 7% state long-term capital gains tax on sales above the threshold, and other states may claw back some income if your grant pre-dated your move.
- What happens if I exercise ISOs while living in Texas?
- Texas does not run a separate state AMT, so only federal AMT applies. You still need to model the bargain element carefully if you plan a cashless exercise-and-sell.
- I moved to Texas from another state. Who taxes my vesting RSUs?
- Most high-tax states (CA, NY, MA) source RSU ordinary income to workdays between grant and vest. If your grant pre-dates your Texas move, expect the old state to tax the portion of each tranche attributable to workdays earned there. Texas taxes the remainder.
- Can I reduce Texas taxes by timing my RSU sales?
- Texas has no state income tax, so sale timing affects only your federal bill. NIIT and federal capital-gains brackets are still in play.
Related
- ISO exercises and AMT — Texas
- Capital gains tax — Texas
- QSBS — Texas
- Moving to or from Texas with unvested equity: trailing nexus rules — Texas
- RSU vesting schedules — Texas
- ESPP taxation — Texas
- NSO exercises and state tax — Texas
- 401(k) and retirement accounts — Texas
- Leaving Texas: how to cleanly break residency before a liquidity event — Texas
- Texas equity-comp overview