Musk could save $2B in California taxes on Texas move

Tesla boss would duck 13 percent capital-gains tab if his claim of residency holds up

Los Angeles /
Nov.November 30, 2021 03:30 PM
Photo Illustration of Elon Musk (Getty)

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 the State of 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 stock was trading at about $1,127 a share Tuesday morning. Texas does not tax personal income, including capital gains.

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





    Related Articles

    arrow_forward_ios
    422 E. 84th Street (Google)
    Uptown chiropractor, diamond dealer battle over $349K in rent on UES
    Uptown chiropractor, diamond dealer battle over $349K in rent on UES
    The property on 73rd Street formerly owned by Grace Kelly. (Getty, StreetEasy)
    UES townhouse rumored to have been owned by Grace Kelly sells for $25M
    UES townhouse rumored to have been owned by Grace Kelly sells for $25M
    Firefighters battling a 11-alarm fire at a chemical plant in Passaic. (Photo by Tayfun Coskun/Anadolu Agency via Getty Images)
    Bergen County residents told to close windows after fire at chlorine plant
    Bergen County residents told to close windows after fire at chlorine plant
    1428 N Genesee Drive and Freddie Krueger (Realtor, Wikimedia)
    ‘A Nightmare on Elm Street’ home sells for $3M
    ‘A Nightmare on Elm Street’ home sells for $3M
    Discovery at West Road on 9404 West Road, Houston and Haven at Eldridge on 13115 Whittington Drive and McCann Realty Partners Matt Akin (Pegasus Residential, McCann Realty Partners)
    McCann Realty Partners swings two Texas multifamily deals
    McCann Realty Partners swings two Texas multifamily deals
    (Illustration by The Real Deal)
    More than 14K LI residents in mortgage delinquency
    More than 14K LI residents in mortgage delinquency
    9811 Copper Creek Drive, Austin with Tides Equities’ Sean Kia and Ryan Andrade (Tides Equities, Google Maps)
    Tides Equities snags another Texas multifamily property
    Tides Equities snags another Texas multifamily property
    Liz Nunan, ceo, Houlihan Lawrence (Houlihan Lawrence, iStock)
    Lower Hudson Valley notched home sale growth in 2021
    Lower Hudson Valley notched home sale growth in 2021
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...