PIASCIK’S FIVE TIPS FOR PROFESSIONAL ATHLETES ... AND OTHERS EARNING MONEY STATE-TO-STATE

THE JOCK TAX

Professional sports players get taxed by pretty much every city and state in which they play. NFL players typically file in 10 to 12 taxing jurisdictions, including local cities, etc. All those filings can make for one doorstop of a tax return. Cities also collect a “Jock Tax” from professional players, plus all of the coaches, trainers, medical staff and equipment managers for every day they spend in a city where the team is playing. Most states and localities look at Duty Days, or the total number of days they work in a season. Duty days include games, spring training, training camp, practice days, travel days and contractual public appearances. A locality would divide a player’s annual salary by the number of days in the locality and take their tax percentage of that amount for tax revenue.

DOCUMENT EVERYTHING!

Sports players can deduct most expenses associated with preseason training not reimbursed by the team, including hotel, apartment or home rental, meals, transportation to the training location, and car rentals. An agent’s fee also is fully deductible. Players must claim the value of gift bags and other “swag” they receive at awards ceremonies and celebrity events as income.

LOCATION, LOCATION, LOCATION

Where an athlete chooses to live can make a difference. Their salaries are taxed by the city and state where their team is based. But income from other sources, including endorsements, personal appearances, dividends and interest income, is taxed in their state of residence. A player for the New York Giants who chooses to live in Manhattan will pay a state tax rate but also a New York City tax rate on wage income, as well as endorsements and investment interest. However, the Giants player who instead chooses residency in New Jersey can save some taxes by not having all of his investment income, some appearances and/or some endorsement income taxed in New York state and New York City, but rather New Jersey.

GO WITH A TAX-FRIENDLY STATE

Taxes — or the lack of them — can lead players to choose to play for teams in states that lack a state income tax (e.g., Florida, Nevada, Tennessee, Texas, Washington, etc.). Consider a player signing with the Miami Heat over the New York Knicks: it can be an extra 5 percent to 9 percent difference in tax.

GET AN EXPERIENCED TAX ADVISER

Players should be sure that they are aligned with a tax adviser who is proficient and extremely knowledgeable with all of these federal state income tax rules. This knowledge extends not only for the special deductions allowed to be taken by professional athletes, but also for every state he or she plays in. Caution to athletes who “cheap out” on a tax adviser who may not be experienced in all these multistate rules: This could end up costing the athlete tons of extra taxes to be paid on tax returns. The misinformed tax advisers just don’t inform the athletes of these extra taxes paid — and then, to make it worse, the athlete almost always ends up in an IRS or multistate tax audit. A tax adviser should save clients more money than the CPA costs. So in essence, a good tax adviser is always “free.”