Moneywise and Yahoo Finance LLC may earn commission or income by linking to the following content.
Last year, Elon Musk became the first person in history to surpass $500 billion in net worth. Now, the Tesla and SpaceX CEO says he expects to pay roughly the same amount in taxes over his lifetime.
“I’ll probably pay over $500B in taxes, including death,” Musk wrote in X(1).
The claim is surprising. But is it true?
Musk’s claims come at a time when his compensation, particularly from Tesla, is once again in the spotlight. After a Delaware judge invalidated his 2018 pay package, Tesla shareholders voted to re-approve the deal, which is likely worth tens of billions of dollars in stock options if performance goals are met (2). These options, when exercised, will generate large tax bills tied to the value of the shares.
It’s also not the first time Musk has publicly lashed out at taxes. In 2021, he clashed with lawmakers over proposals for a billionaire “wealth tax”—arguing that taxing unrealized gains would discourage innovation (3). That same year, he sold Tesla for billions of dollars and paid what he described as “the biggest tax bill in history.”
But to understand whether a $500 billion tax bill is even acceptable, you have to understand how the wealth of billionaires is taxed in the first place.
In 2021, Musk said he will pay about $11 billion in taxes, largely due to exercising Tesla stock options. At the same time, the media widely reported it as one of the largest single-year tax bills in American history (4).
This tax liability arose after Musk sold billions of dollars worth of Tesla shares and exercised stock options, which are taxed as income upon sale.
However, long-term tax data show a different picture.
A ProPublica investigation of confidential IRS data revealed that between 2014 and 2018, Musk reported approximately $1.52 billion in income and paid approximately $455 million in federal income taxes (5). This rate is much lower than the growth of his overall wealth during this period.
The same report found that, based on IRS filings, Musk paid no federal income taxes in 2018.
This is because the wealth of billionaires often comes from unrealized gains. This is the increase in stock value that is tax-free until the shares are sold or the options are exercised.
So if most of Musk’s wealth is tied to unrealized gains, under what circumstances will the $500 billion tax actually materialize?
Read more: I’m almost 50 and have no retirement savings. Is it too late to catch up?
Read more: Non-millionaires can now invest in this $1B private real estate fund starting at just $10
If Musk’s Tesla compensation package eventually reaches $1 trillion in value over the next decade, the tax math will seem a little far-fetched.
That said, Musk’s pay package is largely made up of stock options — the right to buy Tesla shares at a set price if the company hits performance goals. These options are not taxed when granted and are taxed only when exercised.
When musk options are exercised, the difference between the strike price and the market value of the shares is usually taxed as ordinary income. In Musk’s case, it would likely be taxed at the top federal rate of 37%.
At this rate, a fully taxable $1 trillion payout would generate $370 billion in taxes.
This number increases even more when additional taxes are calculated, such as long-term capital gains due to the sale of these options. At a net tax rate of 23.8%, and assuming a 10% gain on the first trillion, Musk would be hit with a total of $393.8 billion in taxes.
When accounting for taxes paid over the years, future stock sales or potential estate taxes at death, Musk’s half-a-trillion-dollar prediction looks mathematically feasible on paper.
But this calculation assumes that the entire amount is recognized as fully taxable income, not to mention that Musk’s financial advisors are not planning any strategic income.
In practice, super-rich individuals like Musk rarely incur an immediate tax on the full value of stock-based compensation. Instead, they often defer taxable events or borrow against appreciated shares.
And they don’t do it alone.
A financial advisor can help crunch the numbers and create a plan that works.
But hiring an advisor can be a lifelong commitment, which may make or break your retirement. That’s why finding reliable help is so important.
That’s where Advisor.com can come in, which connects you with a financial expert near you for free.
Advisor.com does the heavy lifting for you, evaluating advisors based on track record, client ratio, and organizational background. Additionally, their network includes trustees, who are legally required to act in your best interests.
Just enter a few details about your finances and goals, and Advisor.com’s AI-powered matching tool will connect you with a qualified expert who fits your needs based on your specific financial goals and preferences.
Finding the right advisor isn’t always easy – there’s no one-size-fits-all solution. That’s why Advisor.com allows you to set up free initial consultations with no obligation to hire to see if they’re right for you.
Once you’ve got the right financial advisor in your corner, the next step is to get a clear picture of where your money is really going. It starts with the basics – budgeting and tracking your expenses.
Even billionaires must know where their money is going, often relying on teams of tax lawyers, CPAs, estate planners and investment advisors (often under a private “family office”) to manage everything from the timing of capital gains to charitable giving and intergenerational wealth transfers.
Whether you’re managing billions or building a retirement nest egg, the lesson is the same: tax strategy isn’t something you think about once a year. This is how you improve your financial life over time.
It should be every day.
High-income and financially conscious families have taxes on their minds all the time. Some good exercises to incorporate might include:
Setting up tax withholding if you receive a large refund
Time your investment sales strategically
Maximize retirement contributions before the end of the year
Consider Roth conversions in low-income years
This is where professional guidance can pay off. The super-rich don’t rely on guesswork when it comes to taxes, and while most Americans won’t need a personal family office, having expert insight can make a meaningful difference.
That said, in lieu of professional help, there are still smart, legal strategies that can help reduce what you owe.
Few Americans will ever face a billion-dollar tax bill, but tax season still puts pressure on many families.
Fortunately, there are legitimate ways to reduce what you owe, and it’s often through strategically structuring your savings and investments.
One of the simplest ways to reduce your taxable income is to contribute to a traditional 401(k).
Deferrals attributable to a 401(k) are not included in gross income in the year they are made, meaning you are taxed on less income today (6). For 2026, contribution limits for most workers are increased to $24,500, with additional catch-up contributions available for those 50 and older (7).
While maxing out a 401(k) can reduce taxable income, long-term investments outside of employer plans still play an important role in building wealth.
The beauty of ETF investing is its accessibility – anyone, regardless of wealth, can participate. And even small amounts can grow over time with tools like Acorns, a popular app that automatically invests your spare change.
Signing up for Acorns takes just minutes: Link your cards, and Acorns will round up each purchase to the nearest dollar and invest the difference in a diversified portfolio.
Even better, when you sign up with recurring deposits, Acorns will add a $20 bonus to help you start your investment journey.
Meanwhile, for someone in the 24% federal tax bracket, increasing the 401(k) can reduce the tax burden by thousands of dollars.
While traditional retirement accounts are often invested in stocks and bonds, some investors prefer more diversification in tax-advantaged structures.
Self-directed IRAs, for example, allow certain alternative assets to be held in a retirement account. This means that earnings can grow tax-deferred (in a traditional IRA) or potentially tax-free (in a Roth IRA), depending on the type of account.
Providers like Priority Gold focus on precious metals IRAs, positioning gold as a way to combine the tax advantages of retirement accounts with an asset class some investors see as a long-term store of value.
Gold IRAs allow investors to hold physical gold or gold-related assets in a retirement account, which combines the tax benefits of an IRA with the protective benefits of gold investments, making them an attractive option for those potentially hedging their retirement funds against economic uncertainty.
For more information, you can get a free information guide that includes details on how to get $10,000 in free silver on qualifying purchases. Just remember that gold is often used as part of an otherwise well-diversified portfolio.
How long you invest significantly affects its tax treatment.
Assets held for more than one year are eligible for long-term capital gains tax rates. It depends on income, with rates such as 0%, 15% or 20% (8). Short-term gains, in contrast, are taxed as ordinary income, resulting in a higher tax rate.
This difference in treatment is one reason why many investors emphasize patience in continuous trading. By reducing turnover and holding assets for longer periods, smart investors reduce their exposure to higher short-term tax rates and allow compounding to operate with less “tax drag.”
Some asset classes are structurally better suited to long-term holdings.
Real estate, for example, has historically offered tax benefits, such as depreciation and tax deductions, that can reduce income if the property appreciates over time.
Platforms like Mogul offer fractional ownership in blue-chip rental properties, allowing investors to be exposed to rental income and potential appreciation without directly managing the properties.
Because these investments are typically built around a multi-year holding period, they complement a long-term, tax-aware portfolio strategy.
Getting started is quick and easy. You can sign up for an account and then search for available properties. Once you verify your information with their team, you can start investing like a mogul in just a few clicks.
Of course, these methods won’t produce billionaire-level tax math. But over time, prioritizing long-term capital gains and tax-efficient structures can significantly reduce your overall tax burden.
Join 250,000+ readers and be the first to get the best Moneywise stories and exclusive interviews – insightful insights curated and delivered weekly. Join now.
We rely only on verified sources and reliable third-party reporting. For details, see ourInstitutional Ethics and Guidelines.
@elonmusk (1); Reuters (2); Bloomberg (3); Investing.com (4); public public (5); AP News (6); IRS (7)
This article provides information only and should not be used as advice. It is provided without warranty of any kind.
