Tesla (TSLA) CEO Elon Musk wants to close down tax loopholes as part of his wide-ranging remit at the Department of Government Efficiency, but he’s not immune from criticism about his own company’s failure to pay income tax.
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In response to a post on X calling for tax reform, a number of users noted that Tesla did not pay federal income tax for many years, including in 2024. But Musk shot back with a riposte to silence the doubters.
“Tesla losses were high for many years,” Musk said , citing carry-forward rules and the fact that Tesla’s profits are generated mainly overseas.
Musk $10B, TSLA $0
Citing Tesla’s year-end financial report released last month, the Institute on Taxation and Economic Policy (ITEP) reported that Tesla paid a 0% federal income tax rate last year, despite $2.3 billion in income.
It notes that in the last three years TSLA paid just $48 million in federal income tax, all in 2023, on total U.S. income of $10.8 billion.
Tesla’s finance vice president Sendil Palani weighed in to explain further, arguing that the company’s income taxes are not an example of fraud.
“Tesla complies with all tax regulations in all of the regions of the world in which we operate,” he posted on X. “Details about 2024 Income Taxes were disclosed to last month in our 10-K. Notably – we outline our net operating loss carry-forwards, which result from the fact that Tesla has been unprofitable for the significant majority of its 20+ year history.”
Merely looking at any one recent year in isolation will not provide the “full picture,” he added.
According to ITEP, Tesla saved about $500 million in taxes last year using accelerated depreciation. Additionally, tax breaks for executive stock options trimmed $250 million off the company’s tax bill, while “unspecified U.S. tax credits” added a further $300 million of tax savings.
TSLA also used net operating losses to offset current year income, although ITEP notes that “it’s hard to know how much of that affects U.S. income rather than the company’s far-larger foreign income.”
Despite TSLA keeping its tax bill to a minimum, Musk last year joked that he is the “largest individual taxpayer in history” after paying $10 billion in personal income taxes.
Is TSLA a Good Stock to Buy?
Overall, Wall Street has a Hold consensus rating on TSLA, based on 12 Buys, 12 Holds and 10 Sells. The average TSLA price target of $336.48 implies about 6% downside from current levels.
