Musk Faces Highest Tax Bill In U.S. History

Elon Musk, the world’s richest person and CEO of Tesla Inc., could face a tax bill in excess of $10 billion for 2021, if he exercises all his options due to expire next year. While it is hard to say whether that would be a record since the Internal Revenue Service does not publicly reveal individual tax filings, it would certainly rank as one of the largest payments of all time. Not surprising to many who follow Musk, a $10 billion payment is just a fraction of his overall wealth. His net worth is a quarter of a trillion dollars on the Bloomberg Billionaires Index, having risen by $95 billion so far this year.

Elon Musk’s exercise of an unusually large number of options is boosting his claim that he will pay more taxes this year than any other American in history, as he spars with Senator Elizabeth Warren over wealth inequality. Musk’s latest Twitter spat with the Massachusetts senator began after Warren blasted the Tax Code for being “rigged” and asked to change it “so The Person of the Year will actually pay taxes and stop freeloading off everyone else.” In a reply, Musk tweeted, “If you opened your eyes for 2 seconds, you would realize I will pay more taxes than any American in history this year.”

Musk faces the unusually high tax bill after exercising almost 15 million options and selling millions of shares to cover the taxes related to the transactions. That was following a Twitter poll last month where he asked whether he should sell 10% of his stake in Tesla. Musk may end up saving a couple of billion dollars in capital-gains taxes he would have owed to California because of his move to Texas.

A report in June stated that Musk paid little income tax relative to his outsize wealth. He has pushed back against this characterization, saying he does not draw a salary from either SpaceX or Tesla, and pays an effective tax rate of 53% on stock options he exercises. He added that he expects that tax rate to increase next year.

Musk is not the only billionaire likely to pay a big tax bill this year. Many top U.S. billionaires have more than doubled their stock sale activity this year, as the richest Americans unload shares after a run-up in stock valuations and before a potential tax hike in 2022. So far this year, Jeff Bezos, the second-richest person in the world, has sold more than $9 billion in Amazon stock, while Mark Zuckerberg has liquidated $4.5 billion in shares of Meta Platforms Inc. Both men are likely to pay a lower tax rate than Musk, partly because their sales are designed to fund charitable endeavors, which allow tax deductions.

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