Tesla’s Elon Musk could save $2B in taxes with California-to-Texas move

Photo Illustration of Elon Musk (Getty)

Elon Musk’s claim of residency in Texas could save a $2 billion capital gains tab if he follows through with a pledge to sell a 10 percent stake in the company he co-founded and built into an automotive juggernaut in California.

The $2 billion bill was calculated by Bloomberg News as the amount Tesla co-founder Musk would need to pay the more-than-13-percent capital gains tax on such sales that California adds to the top federal tax rate of nearly 24 percent.

It also assumes that Musk will follow through on his pledge to sell off a 10 percent stake in Tesla, a notion that followed a Twitter poll. Tesla stocks were trading at about $1,127 a share Tuesday morning.

Musk said in December 2020 that he’d moved to Texas and later sold his seven remaining homes in California, allowing him to claim that he’s no longer a resident of the state with the highest income taxes on the rich in the U.S. He’s also announced plans to move Tesla’s headquarters to Texas’ capital city of Austin.

Whether he’s able to avoid paying more than $2 billion in capital gains taxes will depend on the length of time between his official move date to Texas and a large transaction such as a property sale, Bloomberg reported. Financial advisors generally tell taxpayers to wait six months to a year or risk raising issues with California’s auditors, according to Bloomberg.

To no longer be considered a California resident, taxpayers must physically relocate themselves and demonstrate that they intend to remain in a new locality permanently or indefinitely, among other criteria, according to the state’s tax board.

“That’s a complex analysis,” Christopher Manes, an attorney who specializes in California tax residency issues, told Bloomberg. “If he’s (Musk’s) claiming he’s a nonresident, obviously California has an incentive to audit him and find out.”

Musk, who said he’s now living in a $50,000, prefabricated home in Boca Chica, Texas, will likely still need to pay some California taxes even though he claims to no longer reside there. California would generally have the right to tax previously exercised options because they’re treated much like the salary Musk earns for his work at Tesla, Bloomberg reported.

A representative for Tesla did not respond to an email seeking comment.

[Bloomberg] — Matthew Niksa

Most Related Links :
Business News Governmental News Finance News

Need Your Help Today. Your $1 can change life.

[charitable_donation_form campaign_id=57167]

Source link

Back to top button