How RSUs and Equity Compensation Affect Buying a Home in Austin

I've worked with a good number of clients moving to Austin from California, New York, and Seattle whose pay package includes RSUs, and almost every one of them asks some version of the same question. How much of this stock can I actually count as a down payment, and does moving to Texas change what I owe on it? Here's what I've learned helping people work through that exact decision.

TL;DR: How RSUs and Equity Compensation Affect Buying a Home in Austin

• RSUs are taxed as ordinary income the day they vest, not when you're granted them and not when you sell, so unvested shares are not spendable money yet.
• Moving to Texas before a vest date does stop future vests from owing any state income tax, but it does not erase what California or New York can still claim on the portion you earned while working there.
• Lenders generally want twelve to twenty four months of vesting history before they'll count RSU income toward your mortgage, so a brand new grant usually can't qualify you for a bigger loan on day one.
• The most common mistake I see is treating a grant's total headline value as if it were cash in the bank when it's really a payment schedule spread over years, subject to the stock price and to still being employed.
• Setting aside cash for the tax bill at vesting, not just at tax filing time, is what keeps a good year from turning into a rough April.

What actually happens to your RSUs when you vest

A restricted stock unit is a promise from your employer to hand you actual shares on a set schedule, usually over four years with the first quarter vesting after a one year cliff. Nothing is taxed at the grant date. The tax hit lands on the vest date, when the shares become yours, and it's treated as ordinary income added right on top of your salary, not as a capital gain. Most employers withhold at a flat twenty two percent federal rate on the first million dollars of supplemental wages in a year, which sounds reasonable until you remember that anyone in the thirty two percent bracket or higher is under withheld by default. I've had clients get a surprise bill the following April because they assumed the withholding on their pay stub covered the whole tax, and it usually doesn't.

Once shares vest, your cost basis resets to that day's value. If you sell right away, there's little additional capital gain to worry about beyond the ordinary income tax already withheld. If you hold the shares and they go up, that additional gain is taxed separately, short term if you sell within a year of vesting and long term after that. Two different tax events, two different rates, and it's worth knowing which one applies before you decide to hold or sell.

Why relocating to Texas matters, and where the myth kicks in

Texas has no state income tax, so any RSU tranche that vests after you've genuinely established Texas residency owes nothing to a state on top of federal tax. That part is simple and it's a real, meaningful benefit for anyone moving here from California or New York.

Where I see people get tripped up is assuming the move wipes the slate clean on everything, including grants that were already partly earned while they were working in their old state. California and New York both tax RSU income based on where you actually performed the work during the period between grant and vest, not just where you happen to live on the day it vests. If you worked in California for three of the four years a grant was vesting and then moved to Texas before the final vest, California can still claim roughly three quarters of that vest as California source income, using what's essentially a workday ratio. New York applies a similar rule. Your paycheck's state withholding often doesn't sort this out cleanly on its own, so this is genuinely a place where I tell clients to sit down with a CPA rather than assume the payroll system handled it correctly. I'm not a tax advisor and this isn't tax advice, just a pattern I've watched catch people off guard more than once.

How lenders actually look at RSU income

Mortgage lenders don't automatically count every dollar of RSU value toward your qualifying income, and that surprises people who assume a six figure grant functions like a six figure salary. For a standard time based vesting schedule, most conventional lenders following Fannie Mae or Freddie Mac guidelines want to see about twelve months of vesting history before counting it, and they'll typically average the last two years if you have that much on file. They also want to see enough unvested shares left on your schedule to reasonably expect the income to continue for roughly the next three years. That means a relocating employee who just started a job with a fresh four year grant and no vesting history yet may not be able to use that stock as qualifying income right away, even though the offer letter shows a large number.

If you're weighing how far your income and savings can stretch on an actual home in this market, this Austin relocation guide for tech workers walks through the broader cost of living picture, and it's worth reading alongside whatever your lender tells you about how they'll treat your specific compensation package.

The most common mistakes I see with equity heavy buyers

The biggest one is mental accounting. Someone sees a four year grant with a headline value and starts shopping for a home as if that whole number is already theirs. It isn't. It's spread across years, tied to continued employment, and moves with the stock price in the meantime. A grant that looked generous when the stock was up can shrink considerably by the time later tranches vest.

The second mistake is timing a down payment too tightly around a single vest and sell date. If the stock drops between when you started planning and when you actually sell, your available cash drops with it, and you can end up scrambling during option period on a contract you've already signed. I generally encourage clients to build in a cushion rather than counting on one specific sale to land exactly the number they budgeted.

The third is forgetting the tax bill entirely. The federal withholding at vesting is a flat rate that often falls short of your actual bracket, and depending on your situation there may be a state tax obligation left over from time spent working in a different state before you moved. Setting aside real cash for that bill, separate from your down payment fund, saves a lot of stress later.

If your compensation includes equity and you're weighing an offer on a home that's drawing multiple bids, it's also worth understanding how appraisal gap coverage works in Texas, since buyers with strong liquid reserves from RSU sales are often in a good position to use it as a competitive tool, within reason.

Putting it together when you're planning a purchase

When I'm working with a client whose compensation leans heavily on equity, we usually start by separating what's actually vested and sellable today from what's still a promise on a future date. That vested, sellable amount is the real number for a down payment conversation. From there, we look at whether upcoming vests over the next year or two are predictable enough to factor into a slightly larger budget, understanding the lender will still want their own documentation before counting it as qualifying income.

Property taxes are also part of this conversation more than people expect. Texas makes up for having no income tax with property tax rates that run higher than many of the states RSU heavy buyers are moving from, so the savings on one side of the ledger get partly offset on the other. Running the actual numbers on a specific property with an Austin Texas property tax calculator gives you a clearer picture than assuming the whole Texas move is a pure financial win with no tradeoffs.

Common misconceptions worth clearing up

I hear a version of "I don't owe California anything once I'm in Texas" often enough that it's worth repeating here plainly. Moving stops future state tax on future vests. It does not retroactively erase the portion of a grant that was earned while you were physically working in California or New York. Those are two different questions, and conflating them is the single most expensive misunderstanding I run into with relocating equity compensation clients.

The other misconception is treating unvested shares as net worth you can lean on for a purchase decision today. Unvested RSUs can be forfeited if you leave the company or get laid off before they vest, and their dollar value moves with the stock price the whole time they're outstanding. They're a real and often substantial part of your financial picture, just not a liquid one yet.

Summary

RSUs can absolutely help fund a home purchase in Austin, and the lack of a Texas state income tax on future vests is a genuine advantage for anyone relocating here. The part that trips people up is treating unvested or recently earned equity as if it were already cash, and skipping the conversation with a CPA about what your old state might still be owed on grants that were partly earned there. Get a clear picture of what's actually vested and sellable, talk to a lender early about how they'll treat your specific package, and set aside real money for the tax bill before you start shopping.

Frequently Asked Questions

Can I use unvested RSUs as part of my down payment?

Not directly. Unvested shares aren't yours yet and can be forfeited if you leave your job before they vest. Lenders generally won't count them as an asset, though a predictable vesting schedule with history behind it can sometimes help with income qualification. Your down payment should come from shares that have already vested and, ideally, already sold.

Do I still owe California taxes on RSUs after moving to Texas?

Possibly, on the portion of a grant tied to time you actually worked in California before the move. California and New York both use a workday allocation method that looks at where you performed the work during the vesting period, not just where you live on vest day. This is genuinely complex enough that I'd point you to a CPA rather than try to calculate it yourself.

How much RSU vesting history do lenders want to see?

Most conventional lenders want at least twelve months of vesting history for standard time based RSUs, and often use a two year average if you have it. They'll also check that your remaining unvested shares suggest the income will reasonably continue for the next few years.

Should I sell my RSUs as soon as they vest or hold them?

That depends on your risk tolerance, your broader portfolio, and your timeline for buying, and it edges into financial advice I'm not licensed to give. What I can tell you from a home buying standpoint is that selling closer to when you actually need the cash reduces the risk of a market drop shrinking your down payment between planning and closing.

Does Texas's lack of income tax make up for the RSU tax I already paid elsewhere?

It helps going forward, since every future vest after you've established Texas residency avoids state income tax entirely. It doesn't refund anything you already owed another state. The two are separate ledgers, not one offsetting the other.

What's the biggest mistake you see equity compensated buyers make?

Budgeting off the total headline value of a grant instead of what's actually vested, sold, and sitting in an account. I'd rather a client under promise themselves and be pleasantly surprised than commit to a purchase assuming stock performs exactly the way a spreadsheet projected.

If you're relocating to Austin with equity compensation as part of your package and want to talk through what a realistic budget actually looks like once vesting schedules, taxes, and your own comfort level are accounted for, I'm happy to walk through it with you. This isn't financial or tax advice, just perspective from having done this with a lot of clients in your exact situation, and I'd always encourage you to loop in a CPA on the tax specifics for your own case.

Written for buyers and sellers in the Greater Austin, Texas area by Robbie English, Broker, REALTOR at Uncommon Realty.