Elon Musk could save billions in taxes if Tesla moves its headquarters

Elon Musk

Mark Ralston | AFP | Getty Images

Elon Musk could save billions of dollars in taxes over time if he moves his business and home in Nevada or Texas, according to accountants.

Musk, involved in a battle with the State of California and Alameda County over his efforts to reopen the Tesla plant, tweeted threats over the weekend to move the business to Nevada or Texas .

“It’s the final straw,” Musk tweeted. “Tesla will immediately move its headquarters and future programs to Texas / Nevada.”

If Musk moved his main residence to California, which has the highest income tax rate in the country, he could save hundreds of millions of dollars, if not billions, in income taxes over the years. come. Texas and Nevada have no income tax.

There is no sign that personal taxes are taking into account Musk’s decisions about the best future location for the electric car maker. Tesla did not immediately respond to a request for comment on Musk’s plans.

But wealthy Californian accountants say Musk would join a growing list of wealthy Californians moving to Nevada and Texas to avoid California’s famous income taxes.

“If I were a betting man, I would say the odds are that taxes are a consideration,” said Daniel Morris, chartered accountant and senior partner at Morris + D’Angelo in San Jose, California, who works with a number of wealthy tech leaders. “How could it be otherwise?”

Musk’s tax rates have taken on new importance because of his latest compensation program. The package, awarded in 2018, gives it tranches of stock options based on the company’s achievement of certain operating objectives and market value.

According to documents filed by Tesla, the package could bring him a total of more than $ 55 billion over time if the company achieves a series of goals. The first trench was launched last week and is already bringing Musk more than $ 780 million in profit. Musk will pay income tax from the stock options when it exercises the options.

California imposes a 13.3% income tax rate on its highest earners. So if Musk exercised the options while he was a resident of California, he would pay $ 104 million in taxes. If he waits until he moves to Texas or Nevada, he should owe no state income tax on the sale – saving $ 104 million.

If Tesla achieves all of the goals set out in the compensation plan and Musk moves to Nevada or Texas, he would save more than $ 7 billion in state taxes out of the estimated $ 55 billion in compensation.

Some of the goals Musk must meet in the plan are related to the company’s market capitalization. Tesla shares have climbed almost 240% in the past year and 94% since the start of the year, placing the market value above $ 151 billion. Other milestones are linked to the benchmarks of turnover and profitability.

Morris said the beauty of paying stock options is that the wealthy can choose when to exercise these grants. So, even though Musk was granted options this year while resident in California, he could wait until he is established in Nevada or Texas before exercising them.

“That’s why you see all these wealthy technicians moving to the Nevada side of Lake Tahoe,” said Morris. “You just have to make sure you don’t go back to California frequently.”

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.