You might think athletes have it made: they play a game for their job, travel all over the world, live exciting lives and make boat loads of money. While all of this may or may not be true, they are still not excused from their fiscal responsibilities, including paying taxes. And just like the average Joe, they pay their fair share, without any break due to who they are.
To start, lets examine the average salaries for the four most popular sports in North America. An athlete in the NBA, NFL, MLB or NHL averages $5.5, $3.3, $2.4 and $1.9 million per year, respectively. That works out to an average $3.3 million per year for discussion’s sake. Since this figure is so large, athletes tend to fall into a higher tax bracket than the average worker, meaning they usually have to pay a higher percentage in taxes. In New York City, for example, they would have to pay a state tax rate of 8.97% versus 6.85% for anyone making between $20,000 and $200,000. They are also subjected to city taxes and federal taxes, all at a higher rate.
Of course, tax rates vary by city and state and some states don’t even require residents to pay income tax. Something to consider is that since athletes are constantly playing in places other than where they live, they also have to pay tax for all money earned there. However, most states allow that tax to count towards what you owe in your home state, so the two figures tend to cancel each other out. Endorsements and money earned from means other than playing should also be noted, and this amount is almost always taxed in the athlete’s home state.
One advantage athletes do have is that they are eligible for a lot of potential deductions. Everything from the fee they pay their agent to costs incurred due to training can be deducted come tax time .
In the end, athletes tend to do pretty well. They are subjected to a higher tax rate, but they are also eligible for some sizable deductions. One this is certain though, they are not afforded any loopholes because of how they make a living and pay taxes just like the rest of us.