Writers of Pro Football Prospectus 2008

17 Apr 2018

The Taxing World of NFL Player Finances

Fascinating article from The MMQB about the complicated world of tax filing for NFL players. They owe state taxes based on where they play and practice, not where they live, which means filing a number of different state returns each year. It also means that playing teams in tax-free states can dramatically change a player's net income, to the point where it makes sense to specifically spend the bye week in a tax-free state.

Posted by: Aaron Schatz on 17 Apr 2018

20 comments, Last at 21 Apr 2018, 3:37pm by The Ninjalectual

Comments

1
by ArcLight :: Tue, 04/17/2018 - 1:54pm

Interesting article.

I'll get an accountant if I make the NFL - in my next lifetime.

2
by Bright Blue Shorts :: Tue, 04/17/2018 - 2:29pm

Quite amazing.

Shame they didn't at least comment on what happens when teams play in London or Mexico. Presume from a tax perspective it's like going abroad on holiday but what do I know.

There was talk that if London ever got a franchise it would make things interesting on the tax front for its players. Seems it wouldn't be that much less complicated!

4
by apk3000 :: Wed, 04/18/2018 - 7:27am

Assuming London and the UK don't have the equivalent of jock taxes, you would pay federal, but any state tax would likely depend on the state's rules on residents and foreign income.

15
by herewegobrownie... :: Wed, 04/18/2018 - 11:31pm

I've read that a prospective London team would likely do everything except the games on the eastern US seaboard. The UK also has lower taxes than CA.

Having done sometimes 100% multiple-state work in the past-albeit in some years it was light enough that I likely could've gotten away with not filing in some of the states that I did--I have experience with how you can credit taxes from one state into another, and am amazed by how complex the whole system is.

16
by CBPodge :: Thu, 04/19/2018 - 10:20am

Disclaimer: I am not an expert in this in any way.

I know a few British people who have renounced their US citizenship due to tax reasons. My understanding is that if you are American, you have to pay US tax on your earnings regardless of where you live. This causes problems for UK residents, because you also have to pay you UK taxes (NFL players would be liable for 40% tax up to £150k of earnings, then 45% after that, although it would work out at slightly less than that because they'd go through lower tax bands on their first £40k or so).

However, I think NFL players would be able to be considered to be non-residents, which would mean they'd mostly avoid paying UK taxes. To be a resident you need to either spend more than 183 days in the UK in a tax year, or your only home be in the UK and spend at least 31 days here in a tax year. Most NFL players would likely not hit the former (if the season is considered to be 170 days, as in the article, plus they'd have a load of travel time). On the second one, this only counts if you own a place. I imagine players would just rent places for the season, so the 31 days wouldn't apply. Coaches might be fucked though, unless the team set up a specific US headquarters for them for the offseason.

They would have to pay bits and pieces of UK taxes (Council Tax for one), but I think it might actually work out financially ok for them.

It would cause problems for players with kids though. I think your options would be:
- Have your kids schooled half in the UK and half in the US
- Leave your kids at home in the US for the season
- Stay in the UK for the offseason, but keep US citizenship, meaning you pay federal tax and UK income tax
- Stay in the UK, try to get an alternative citizenship and renounce your US citizenship, to avoid paying US taxes. That would make airport security quite annoying for you and might cause national anthem problems!

Basically, there are many issues to sort out - tax itself might not be one of them, but general living arrangements, with some relation to tax, would be.

17
by jtr :: Thu, 04/19/2018 - 11:00am

Man, this really puts into perspective how hard a London team would be on the players. Imagine being a bottom-of-the-roster guy who gets cut by a west coast team in training camp and picked up on waivers by the London Monarchs. Now you suddenly need to get your passport in order, sit through a 10 hour flight, find somewhere to live in a foreign country, and work out some international tax issues. Plus figure out how you can accommodate your wife and kids, if applicable. Now you're jetlagged by 8 hours trying to win a roster spot over guys who are accustomed to the time zone. That's really an impossible situation for a player to perform in. In that kind of overwhelming environment, it'll probably be a week before the guy can really start to focus on learning the playbook, let alone competing to climb the depth chart.

18
by Bright Blue Shorts :: Thu, 04/19/2018 - 3:04pm

From a team perspective, the tryouts thing becomes that little bit more difficult. Your kicker misses a game-winning FG on Sunday and you need to bring in some possible replacements on Monday, I guess you have someone Stateside managing that process. But it means the coaches and the GM can't see the guy or talk to him.

For the player who does get picked up on waivers, you book into a hotel for the first week. I'm sure the growth of AirBnB type rentals would help a lot. The good tennis players coming to Wimbledon tend to rent for the fortnight if the expect to be making the semi's and so on.

But all in all, it's a lot more complicated.

19
by ChrisS :: Fri, 04/20/2018 - 12:59am

I am not an expert either but if you live overseas and have to pay foreign income taxes they are deducted from your US taxes. If UK had a 20% tax rate and US had 30% rate you would pay 20% to UK and 10% to US (if UK tax is higher then you pay zero US tax). I am sure investment income and capital gains are taxed very differently in all jurisdictions and would make taxes difficult to figure out and could be very onerous i certain jurisdictions. I am unsure how the VAT tax which is fairly high in UK would effect one's US tax situation, but that would only come into play if on lived in the UK not just "worked" there.

3
by MarkV :: Tue, 04/17/2018 - 10:41pm

RE #2 Playing in london would be less complicated, but they'd pay higher taxes.

5
by bubqr :: Wed, 04/18/2018 - 10:01am

Taxes complexity are why I did not want to be a NFL player.

6
by andrew :: Wed, 04/18/2018 - 10:33am

To simplify we should realign divisions by tax codes.

So the Dolphins, Bucs, Jags, Texans and Cowboys can all be in the same division....

8
by GwillyGecko :: Wed, 04/18/2018 - 12:49pm

titans too. the only kind of income tax tennessee has is on investment/dividend income

13
by herewegobrownie... :: Wed, 04/18/2018 - 11:22pm

AFC South is already 3/4 tax free--and Indiana has a simple and low - 3.23% - flat income tax.

7
by jtr :: Wed, 04/18/2018 - 11:25am

Tennesee used to have a particularly vicious example, where visiting pro athletes automatically owed $2,500 per game. NFL was exempt for some reason, but NBA and NHL were not. That particularly blatant cash grab shows what a slimy thing these jock taxes can be, specifically targeting people who have no voice in the matter (as voters in another state) and no say in where they work (playing a schedule set by the league).

9
by GwillyGecko :: Wed, 04/18/2018 - 12:50pm

even though that sounds steep it was capped at $7500 a year(so no tax after the first 3 games)

11
by justanothersteve :: Wed, 04/18/2018 - 4:16pm

That would still be steep for players on 10-day NBA contracts or those signed for one NFL game.

12
by Bright Blue Shorts :: Wed, 04/18/2018 - 4:38pm

Ignoring the fact NFL players were exempt ...

NFL rookie minimum wage is $465,000. That's about $29,000 per game. My heart bleeds for the guy who'd earn $25,000 after taxes for one afternoon of playing sport (plus a few days practice).

Let's not forget that poor old Chase Daniel won't even get to play. He'll be paying tax for sitting on a bench.

20
by The Ninjalectual :: Sat, 04/21/2018 - 3:37pm

Right, I'm sure you wouldn't complain if you had to pay an extra 11% when working out of town for three weeks (adjusted to account for the player getting 16 paychecks a year, if that many)

14
by herewegobrownie... :: Wed, 04/18/2018 - 11:27pm

For 10-day contracts, a lot of states and municipalities exempt very short-term business trips from needing to file, or don't enforce them - although they're more likely to be enforced when there's a highly visible paper trail and lots of money with an athlete as opposed to Joe Six-Pack's five-figure income.

10
by Dave Bernreuther :: Wed, 04/18/2018 - 1:35pm

There was a really good article about this in the weeks leading up to the Super Bowl at the Field of Jeans - I remember it explaining that because that game would be 1/21 of Cam Newton's salary then taxed at CA income rates, he would actually be paying money to play in that game based on his actual paid salary that calendar year.

For league minimum players and those who don't quite make it to a second contract, this is pretty substantial. Especially if you play for a CA team that might also be facing the other conference's western division that season too. You could theoretically have a player choosing between signing with the Chargers, with 8 home games, plus road games at Oakland, San Francisco, and the Rams in that season, or maybe the Cowboys, with road dates with say Houston and Jacksonville and Tampa Bay. For a top of market player that's easily getting into 7 figures' worth of difference... but they're paid under the same salary cap.