“I am selling almost all physical possessions. Will own no house.”
By Elon Musk’s standards, his May 2020 tweet wasn’t all that weird. “Possessions kind of weigh you down,” he said on a podcast a few days later, and went on to list seven homes in California. In December, he announced he’d moved to Texas. His charitable foundation followed and, soon, Tesla Inc. will too.
But what first seemed like a case of billionaire wanderlust, or pique with California’s Covid restrictions, now looks more and more like shrewd anticipation of the big tax bill that’s coming Musk’s way.
The sale of the California properties—including a Bay Area luxury estate, a Bel Air mansion and a ranch house once owned by Gene Wilder—enable the Tesla founder to declare he’s no longer a resident of a state that’s home to the nation’s highest income taxes on the wealthy. At least five of the residences were sold to buyers who borrowed money from none other than Musk himself, property records show, helping smooth the way for deals to close.
The transactions will go into the complex, and at times opaque, evaluation of where the world’s richest man actually lives and should be taxed—an equation that’s especially important now that he’s been selling billions of dollars’ worth of Tesla stock.
It all comes down to timing: Musk needs enough length from his departure from California to avoid triggering issues with state authorities. Meanwhile, Democrats in Washington are pressing to raise federal rates on the superrich.
So far, the move from California may have saved Musk, 50, more than half a billion dollars in capital-gains taxes he’d otherwise have owed to the Golden State, according to calculations by Bloomberg News. By the time he sells the full 10% Tesla stake he has tweeted about, he could shave well over $2 billion from his tax bill simply by moving.
“His past activities have been laser-focused on trying to get out of California,” Daren Shaver, senior counsel at Hanson Bridgett in San Francisco, said of Musk. “That could be part of his master plan.”
Musk faces a much more favorable financial environment in Texas: The state has no state income tax or capital-gains tax on individuals.
Musk didn’t respond to a request for comment.
Musk—who has a $296 billion fortune, according to the Bloomberg Billionaires Index—has for years achieved a lower tax bill by borrowing against his Tesla shares rather than selling them. A December 2020 regulatory filing shows that various investment banks have lent him $515 million. The number of shares he’s pledged means he’s potentially borrowed billions more.
Before November, the last time Musk sold stock was in 2016.