fbpx

Elon Musk Says He’ll Pay an $11B Tax Bill for 2021

In a Monday tweet to his more than 67 million Twitter followers, Elon Musk stated that for 2021 he’ll have a multi-billion dollar federal tax bill due to the U.S. government.

According to Forbes, Musk is worth over $244 billion on paper, making him the world’s richest person. His Twitter announcement regarding this mind-boggling tax burden was likely sparked by the fact that earlier this year, ProPublica published an investigative story showing Musk and several other billionaires paid no federal income taxes in 2018.

Between 2014 and 2018, Musk paid $455 million in taxes on $1.52 billion of income, according to ProPublica, despite his wealth growing by $13.9 billion over that period. That article had been re-circulating recently, and its topic of tax avoidance has been a flashpoint of debate. The CEO of Tesla and SpaceX has been publicly sparring with congressional Democrats on Twitter of late, regarding that very issue of overtaxation and tax payment avoidance.

During a back-and-forth last week with Senator Elizabeth Warren Musk tweeted, “I will pay more taxes than any American in history this year.” And that’s probably going to be true. 

Musk sold off $14 billion worth of Tesla stock since early November, to produce cash in advance of a massive tax bill on vested Tesla stock options. Stock options Musk was granted in 2012 are set to expire in August next year. To get their value, he would have to sell them, which would trigger a long-term capital gains tax that would have to be paid, which is why he sold the initial batch in November. He’ll use the proceeds from that sale to cover the taxes of the options that expire next August.

Musk doesn’t draw a salary or cash bonus from SpaceX or Tesla. Instead, his executive compensation package consists largely of stock options that increase in value as the company’s stock price does. It’s based on a pay-for-performance model. Musk reaps the rewards if Tesla stock does well. Though Tesla shares have dipped since his stock sale, Tesla’s share price is still up 28% year-to-date.

On The Flipside

  • When Musk wants cash, he can simply borrow money using his company’s stock as collateral. However, this practice has been criticized by some politicians as a tax loophole for the mega-rich.
  • Musk could have waited until next year to pay the tax bill, but that would have meant potentially getting hit by higher tax rates under the Democrats’ Build Back Better bill.

Why You Should Care?

Tesla is currently the second-largest corporate holder of Bitcoin. The amount is reportedly 38,300 Bitcoin on Tesla’s corporate balance sheet, which is worth nearly $2 billion at the time of writing.

EMAIL NEWSLETTER

Join to get the flipside of crypto

Upgrade your inbox and get our DailyCoin editors’ picks 1x a week delivered straight to your inbox.

    You can always unsubscribe with just 1 click.

    This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed to be financial legal or tax advice. Trading Forex, cryptocurrencies, and CFDs poses a considerable risk of loss

    Rate This Article
    In order to improve, we give you the opportunity to rate DailyCoin content
    Author

    Tor Constantino is a former journalist, consultant and current corporate comms executive with an MBA degree and 25+ years of experience - writing about cryptocurrencies and blockchain since 2017. His writing has appeared across the web on Entrepreneur, Forbes, Fortune, CEOWorld and Yahoo!. Tor's views are his own and do not reflect those of his current employer.