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Will Elon Musk Save on Taxes by Moving to Texas?

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Tesla CEO Elon Musk's net worth has soared this year alongside Tesla stock. As a result, Musk has overtaken Bill Gates as the world’s second-richest person just behind Amazon CEO Jeff Bezos. With massive wealth comes a lot of attention. Many people wonder how much Musk pays in taxes.

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Musk revealed at the Wall Street Journal’s 2020 CEO Council summit that he relocated his residence to Texas from California. Since Texas is known for having a favorable tax climate, many people want to know how much Musk pays in taxes. Did he select Texas in order to pay lower taxes?

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Why did Elon Musk leave California?

Elon Musk has called California home for a long time. His decision to relocate from the state wasn't a surprise for anyone who follows the outspoken Tesla boss. Musk was very critical of California’s regulatory climate in recent months.

For example, Musk openly expressed his frustration with Alameda County officials after they refused to allow Tesla to reopen its Fremont factory during the COVID-19 pandemic.

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Another factor that drove the Tesla CEO out of California was that he felt that the state was taking the company's success for granted. Musk admits that California has many great things. However, he thinks officials there may be ruining its image as a great place for business.

Why did Elon Musk move to Texas?

California’s difficult officials may be the main reason Musk moved to Texas. However, Musk may also have favored relocating to Texas because of his growing business interest in the state. Tesla and SpaceX are undertaking massive projects in Texas.

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Tesla is building a huge factory outside Austin called Giga Texas. The factory will produce Tesla vehicles for sale in the eastern part of the country. SpaceX is undertaking a massive spaceship and rocket system program called Starship in South Texas. Musk’s Boring Company also has operations in Texas. As a result, moving to Texas brought Musk closer to some of his companies’ most important projects.

How much does Elon Musk pay in taxes?

You aren't going to get hard figures on what Musk pays in taxes because the billionaire doesn’t publish his tax records. Even outspoken celebrity entrepreneurs keep some of their personal financial details private.

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Elon Musk doesn’t get a salary for his role as Tesla's CEO. Instead, the executive’s primary compensation is stock options, which are granted based on the strength of Tesla’s financial results and stock performance. Musk should pay income tax whenever he exercises his stock options. 

Musk owns real estate property, which makes him subject to local property taxes. Also, the Tesla executive would pay capital gain tax when he sells his properties as he did just before relocating from California. 

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Relocating to Texas from California should also save Musk a ton in taxes. California has the highest income tax rate in the country, while Texas doesn't have a personal income tax. Musk could save hundreds of millions of dollars if not billions of dollars by moving his residence from California to Texas. 

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Musk could receive about $60 billion in stock options under a 2018 compensation plan if Tesla’s stock and financial results meet certain targets. At California’s 13.3 percent income tax rate for the rich guys, Musk would owe about $8 billion in state taxes if he remained in California. That can now be counted as a tax saving following Musk’s move to Texas.

How much money does Elon Musk make an hour?

Elon Musk is a billionaire. His fortune is growing at the fastest rate in 2020. Musk's net worth increased by almost $130 billion in the first 11 months of 2020. He's making an average of $12 billion per month, $400 million per day, and more than $16 million per hour in 2020. 

Although Musk moved his residence to Texas from California, Tesla and SpaceX still have a significant operational presence in California. He has hinted that the companies could relocate their headquarters from California to Texas or Nevada. The companies’ continued stay in California will depend on whether the regulatory climate in the state improves or deteriorates.

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