He may be the richest man in history, but Elon Musk’s wealth portfolio also comes with huge taxes – with a $15 billion bill looming, according to news reports.
The Tesla CEO faces the hefty tax bill in the coming months on stock options, CNBC reported on Sunday, fueling the fire that he will make a sale of Tesla stock.
It follows a weekend poll on Twitter in which followers of Musk, voted for the Tesla founder and CEO to sell 10 percent of his stock in the company, after he said he will “abide by the results of this poll, whichever way it goes,” and that selling stock would allow him to pay taxes.
Musk asked his 62.7 million Twitter followers over the weekend whether he should sell 10 percent of his Tesla holdings.
“Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10 percent of my Tesla stock,” he tweeted.
The results were 58 percent in favor of selling and 42 percent against, suggesting he will sell the shares.
Musk holds about 227 million Tesla shares, according to SEC filings, and 10 percent of that is worth about $27.8 billion, as of Friday.
However, Musk would have likely started selling millions of shares this quarter because of the imminent tax bill.
Musk was awarded options in 2012 as part of a compensation plan, CNBC reported.
However, the billionaire – who last became the richest person in history, and the first person to ever be worth more than $300 billion, according to Forbes – doesn’t take a salary or cash bonus.
This means his wealth comes from stock awards and the gains in Tesla’s share price.
The 2012 award was for 22.8 million shares at a striking price of $6.24 per share. Tesla shares closed at $1,222.09 on Friday, meaning his gain on the shares totals just under $28 billion.
The company has also recently disclosed that Musk has taken out loans using his shares as collateral, and with the sales, Musk may want to repay some of those loan obligations.
Given the options expire in August of 2022, to exercise them, Musk has to pay the income tax on the gain.
Since the options are taxed as an employee benefit or compensation, they will be taxed at top ordinary-income levels, or 37 percent plus the 3.8 percent net investment tax, said CNBC.
He will also have to pay the 13.3 percent top tax rate in California since the options were granted and mostly earned while he was a California tax resident.
Combined, the state and federal tax rate will be 54.1 percent.
This would, in effect, mean the total tax bill on his options, at the current price, would be $15 billion.
Musk hasn’t confirmed the size of the tax bill. But he tweeted, “Note, I do not take a cash salary or bonus from anywhere. I only have stock, thus the only way for me to pay taxes personally is to sell stock.”