New York CNN Business  — 

Elon Musk says his tax bill this year will be $11 billion, and he’s probably right: The filings he has made with the Securities and Exchange Commission about his recent stock trades back up that massive number.

Musk revealed the $11 billion total in a tweet Sunday that was otherwise short on details.

This is not significantly different from what he had tweeted last week when, in the midst of a Twitter war with Sen. Elizabeth Warren, he said he’d pay the largest individual tax bill in history this year.

That would be a massive change from some recent years. An investigation by ProPublica found that Musk, and fellow billionaires such as Jeff Bezos and Michael Bloomberg, legally paid zero in income taxes in 2018.

Musk, the world’s richest person, doesn’t earn a cash salary or bonus. He’s instead been paid through stock options, giving him the right to buy shares of Tesla (TSLA) at a price equal to the market price at the time the options are issued, but likely well below their value at the time they are exercised.

Musk received 25.5 million split-adjusted options in 2012, and had 22.9 million of those options vest over subsequent years as Tesla hit certain operational and financial targets. But he didn’t have to pay taxes on those options until he used them to buy shares.

Since that block of options is due to expire in August 2022, Musk finally started the process of turning them into shares of stock in early November. And he documented those trades in SEC filings, as company insiders are required to do.

When he exercises the options, the value of the newly purchased shares are taxed as income — a 40.8% rate for someone in Musk’s tax bracket.

And that is where the huge tax bill comes from.

As part of the process of exercising the options, Musk has been selling a portion of the newly acquired shares to cover the withholding tax due on the trades, according to his filings. Those sales so far have totaled 7.5 million shares, bringing in $7.8 billion so far, including the exercise price.

In addition to the sales of shares he acquired exercising options, he’s also sold some 5.4 million shares that he had held in trust since the start of this process, though those sales will be taxed at a lower, long-term capital-gains rate of 20%.

So, all told, the federal tax bill on his 2021 stock trades comes to about $8.4 billion.

But he’s likely not done yet.

Musk exercising his options and selling some of those shares is being done as part of a pre-arranged plan that allows company insiders to trade stock without being accused of trading on inside information.

Based on past trades, Musk will likely exercise at least 4.2 million more options by year’s end, or perhaps even all of the remaining 5.7 million options that are expiring in August. That will likely raise his taxes by between $1.6 billion and $2.1 billion.

So he’ll be close to an $11 billion tax bill by year’s end.

And none of these calculations involve any potential state income taxes.

Musk has moved his residence — and Tesla’s official home — to Texas, which does not impose a state income tax on individuals. California’s income tax rate is the highest in the nation — about 12%. Although it is not clear how much of his income will be subject to that tax, he likely won’t avoid it altogether, despite his new address.

“Btw, I will continue to pay income taxes in California proportionate to my time in state, which is & will be significant,” Musk tweeted in June.