Donations to minimize the tax bill
As per U.S. laws, stockholders are not required to pay taxes on the wealth accrued by holding stock options. This wealth accrual is called unrealized gains and is not liable for tax. However, when the stock holdings are sold, the wealth obtained is subject to a capital gains tax. However, this can be waived if the stock is donated to a charity.
Last year, Musk sold $22 billion worth of Tesla stock between August and December. The 49 million shares sold during this process are subject to capital gains tax and have brought down Musk’s ownership is Tesla to approximately 13 percent. While these shares are subject to capital gains taxation, the donation of 11.6 million shares will also bring him some relief.
As per filings with the SEC, Musk began to donate the stock in August itself, but about 70 percent of the donation happened over three days in December 2022, which is a strong indication that they were done for tax-saving purposes for the financial year.
Last year, Elon Musk became the largest taxpayer in U.S. history as he was due to pay $11 billion for his earnings in 2021. 2022 was a different year, with Tesla’s share price dipping nearly 65 percent in valuation. Musk is only liable to pay taxes for the share of Tesla stock sold, and donating to charity will help reduce the tax bill.