Navigating the Field

What Athletes Should Know About the Jock Tax

  • Sports & Entertainment
  • Wealth Planning

In Summary

Professional athletes, and now even college athletes, encounter various state income tax filing challenges and complexities. While they cannot avoid the income tax imposed by some of these states, there are proactive steps athletes can take to minimize their overall income tax exposure.

Key Takeaways

  • States that impose an income tax utilize different methods to tax the income of non-resident athletes who play within each state. Understanding these methods is critical to understand and plan for a professional athlete’s “jock tax” exposure.
  • The domicile and tax residency of a professional athlete, as well as college athletes with Name, Image, and Likeness (NIL) deals, can significantly impact their overall tax liability.
  • The structure and conditions of bonuses received by professional athletes can significantly affect whether and how the bonuses are taxed by the individual states in which the athlete plays.
  • While professional athletes will be subject to “jock taxes” imposed by certain states in which they play, there are steps that can be taken to help mitigate their overall state income tax burden.