It is no secret that Elon Musk, the CEO of Tesla and SpaceX, is one of the world’s most successful tech entrepreneurs. But, how much he paid in taxes in 2021? It’s a question that’s been on people’s minds since the release of his annual financial statement.
As of 2021, Musk reported that he earned a total of $595 million. While this may seem like a large sum, it’s actually only 2% of what he earned in 2020. His 2021 year-end federal income tax bill was $259 million. This figure is equal to 44% of his total earnings, compared to 37% the year before.
According to the Tax Foundation, the effective federal tax rate for someone earning over $500,000 is 35%. This means that Musk likely paid more in taxes than someone earning similar income, due to the additional tax brackets put in place by the Biden administration.
Tax experts also point out that Musk may have also paid additional taxes in the form of capital gains taxes, which are triggered when an individual sells investments. Such taxes could easily add millions to Musk’s bill.
Forbes reported that Elon Musk had an estimated net worth of over $170 billion at the time of writing. This vast fortune has been accumulated over the years through his various business ventures and investments. As such, he is legally obliged to pay taxes on his income, like any other citizen of the United States.
Musk’s taxes can also be viewed from a global perspective. He has investments in companies overseas and so he must pay taxes in those countries, too. As of 2021, his estimated taxes paid in other countries is $17.5 million, which is approximately 3% of his total annual income.
It may be difficult to understand why someone with Musk’s wealth would pay such a high federal tax rate, especially when the top earners in the United States only pay 37%. The answer lies in the fact that wealthy people often have businesses, investments and other assets that can be taxed at a much higher rate.
Ultimately, understanding how much in taxes Elon Musk paid in 2021 requires some knowledge of taxation laws and procedures. In addition, it’s important to be aware that taxes can be influenced by current legislation and other factors. Therefore, it is wise for individuals to consult with experts about their specific tax situations.
State & Local Taxes
Apart from federal taxes, Elon Musk also has to pay state and local taxes. State taxes can vary significantly from one state to the next. According to Bloomberg, Musk owned two homes in California, which has a top marginal tax rate of 13.3%. So, Musk likely paid around $7.9 million in 2021 in state taxes in California. In addition, Musk likely paid tens of millions of dollars in taxes to other states in which he holds properties, businesses or investments.
Tax Contributions Towards Charitable Causes
It’s not just taxes which Elon Musk puts his wealth towards. He also donates to various charities and causes. Musk has pledged to donate $1 billion (around 1.7% of his net worth at the time of writing) to causes that help humanity. He revealed that he donated over $100 million in 2020 alone to such causes. Musk’s philanthropic efforts show that he is committed to helping make the world a better place.
Tax Avoidance Strategies Used
Elon Musk follows some of the common tax avoidance strategies used by wealthy individuals. For instance, he has moved his residency from California to Texas. Texas does not tax wages, so this move would have allowed Musk to save millions of dollars in state taxes. He also uses tax-advantaged vehicles such as family trusts to minimize his taxes.
What’s Next?
Elon Musk’s 2021 taxes provide a useful example of how taxes work for the richest 1%. His journey is a reminder of how much tax the wealthy have to pay, and how they use strategic tax avoidance measures to minimize their bills. In 2021, he paid $259 million, but as he accumulates more wealth, it is likely that his taxes will increase exponentially. Therefore, it is important to stay abreast of the latest taxation regulations in order to ensure that individuals and companies are paying the taxes they owe.
