How are RSUs taxed in California?
California tax on vested and sold RSUs
- The Franchise Tax Board (FTB) taxes vested restricted stock units (RSUs), employer share awards earned after meeting set conditions, as wages at 1% to 12.3% for 2026.
- FTB taxes the later sale gain as ordinary income, since California has no lower capital gains rate.
- FTB taxes single filers' 2026 taxable income over $384,109 at 10.3% to 12.3%, more than the optional 10.23% flat rate employers can withhold.
A Torrey Pines biotech scientist who receives 200 RSU shares in 2026 reports their value on the vest date as wages.
California RSU tax rate and withholding
California sets no separate RSU rate; FTB applies its 2026 brackets to vested shares.
- 10.23%California withholding at the Employment Development Department's (EDD) optional flat rate for bonuses and stock options
- 1.3%State Disability Insurance (SDI) on all 2026 wages, with no cap
- 1%Behavioral Health Services Tax on taxable income over $1 million (2025)
How are RSUs taxed in California: a $20,000 vest example
The employer withholds $2,046 of California tax on the vest, $186 more than the $1,860 the scientist owes at a 9.3% top 2026 bracket.
The scientist, a single California resident on a $183,000 salary, receives the shares at $100 each, and the employer withholds at the flat rate. The scientist earns $203,000 in 2026 wages, the county's 2025 life science average, and sells the shares at $110 later in 2026.
- Wages at vest: 200 × $100 = $20,000
- California withheld: $20,000 × 10.23% = $2,046
- California tax: $20,000 × 9.3% = $1,860
- SDI withheld: $20,000 × 1.3% = $260
- Federal withheld: $20,000 × 22% = $4,400 at the IRS supplemental rate; employers withhold 37% on supplemental wages over $1 million in a year
- California tax on the sale gain: 200 × $10 × 9.3% = $186
FTB charges 10.3% to 12.3% on single filers' taxable income above $384,109 (2026), more than the 10.23% withheld.
Selling RSUs or leaving California
Selling vested shares
FTB taxes a resident's gain above the vest value as ordinary income; California has no lower capital gains rate.
After a move, FTB sources a stock gain where the seller lives when selling, so a nonresident seller owes California nothing on it (2025).
Fixing the 1099-B basis
When a broker reports on Form 1099-B a basis, the shares' tax cost, under the vest value, the seller enters code B on Form 8949:
- Basis the broker reported to the IRS (box A or D): the seller keeps the 1099-B basis in column (e) and enters the correction in column (g).
- Basis the broker did not report to the IRS (box B or E): the seller enters the correct basis in column (e) and 0 in column (g).
Moving out of California
FTB has taxed a former resident's vests by the share of workdays spent in California from grant to vest (Chief Counsel Ruling 2014-01).
A Kearny Mesa defense engineer who moves away after working half the grant-to-vest workdays in California owes California tax on half the vest's wage income.
When to hire a CPA for RSU taxes
Employees expecting a large vest, a move or a sale can ask a CPA to check withholding before the next estimated payment: how to choose a CPA.