Musk Saves 2.8 Trillion Won in Taxes Thanks to Move to Texas

▲Elon Musk, CEO of Tesla [Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Elon Musk, CEO of Tesla, saved a whopping $2.4 billion (approximately 2.856 trillion KRW) in taxes by moving his residence from California to Texas.

This is because California has a high state income tax rate, whereas Texas has no income tax at all.

According to Bloomberg on the 29th (local time), Musk recently exercised stock options and sold a large amount of shares, incurring capital gains tax.

The federal capital gains tax rate is 23.8%, and for the $5.8 billion he recently sold, he must pay $1.35 billion (approximately 1.6 trillion KRW) in taxes.

Assuming he sells 10% of his holdings as he pledged on Twitter, the capital gains tax he must pay would increase to $4.35 billion (approximately 5.16 trillion KRW).

Moreover, California state income tax would be added on top of this. With California’s income tax rate at 13.3%, the tax burden would increase by another $2.4 billion.

However, since he sold his houses in California last year and moved to Texas, he does not have to pay this additional tax. Texas has no state-level personal income tax. By moving to Texas, he effectively saved $2.4 billion in taxes.

However, Bloomberg reported that a key variable is whether there is sufficient time gap between the official moving date and the large-scale sale period.

Simply changing the address does not mean one is no longer a resident; it must be demonstrated that the person intends to sever ties with the former state and permanently reside at the new address.

Bloomberg also pointed out that since the stock options granted to Musk can be considered company compensation for his CEO role, he may not be completely free from California’s tax burden.

Earlier, on the 6th, Musk posted a poll on his Twitter account asking whether to sell 10% of his holdings, and after a majority voted in favor, he sold Tesla shares over about 10 days.

Regarding this, the Wall Street Journal (WSJ) estimated that Tesla’s stock price dropped more than 15% in the week following Musk’s tweet, reducing the tax he must pay on stock option exercises by about $380 million (approximately 451.1 billion KRW).

This content was produced with the assistance of AI translation services.