• "For those wondering, I will pay over $11 billion in taxes this year," Elon Musk tweeted Monday.
• Stock options Musk was awarded in 2012 are set to expire in August next year. In order to exercise them, he has to pay income tax on the gain.
• The Tesla and SpaceX chief has been sparring with prominent Democrats on Twitter lately over the issue of tax avoidance.

Elon Musk faces a hefty tax bill this year — possibly the biggest in U.S. history.

"For those wondering, I will pay over $11 billion in taxes this year," the Tesla CEO tweeted on Monday.

That's close to a CNBC estimate that Musk was set to pay a total of $12 billion in taxes in 2021.

Musk has sold off $14 billion worth of Tesla stock since early November, after asking his followers in a Twitter poll if he should sell 10% of his holdings. The response to that poll was a resounding "yes."

But it's likely Musk would have begun selling anyway. That's because he faces a massive tax bill on Tesla stock options.

Stock options Musk was awarded in 2012 are set to expire in August next year. In order to exercise them, he has to pay income tax on the gain.

Rather than take a salary or cash bonus, Musk's wealth comes from stock awards and gains in Tesla's share price.

Though Tesla shares have taken a tumble since Musk's Twitter poll, they remain incredibly valuable — the stock is up 28% year-to-date.

When Musk wants cash, he can simply borrow money using his company's stock as collateral. However, this practice has been criticized by some politicians as a tax loophole for the mega-rich.

Earlier this year, ProPublica published an investigation showing Musk and several other billionaires paid no federal income taxes in 2018.

Between 2014 and 2018, Musk paid $455 million in taxes on $1.52 billion of income, according to ProPublica, despite his wealth growing by $13.9 billion over that period.

According to Forbes, Musk is worth over $244 billion on paper, making him the world's richest man.

Musk could have waited until next year to pay the tax bill, but that would have meant potentially getting hit by higher tax rates under the Democrats' Build Back Better bill.

The Tesla and SpaceX chief has been sparring with prominent Democrats on Twitter lately over the issue of tax avoidance.

Last week, he fired back at Senator Elizabeth Warren after she questioned Time Magazine's decision to name Musk its Person of the Year, tweeting: "I will pay more taxes than any American in history this year."

And if Musk does end up paying the huge sum he said he would, there's a chance he may be right.