Many people envy the lives of professional athletes. These individuals possess tremendous physical gifts, have great physiques, significant acclaim and tons of money. However, athletes who earn millions of dollars might be subject to paying an increased amount of taxes.
Athletes Pay Income Taxes In Numerous States
For most individuals, income tax is only paid to the federal government and, in certain instances, the state in which they reside. This is not the case for athletes. Because athletes perform their jobs in numerous states, such professionals are legally mandated to shell out income taxes for every state which they play. All of the major professional sports leagues are comprised of nearly 30 or more franchises. Athletes must file income taxes in every one of these locations.
Certain States Require Municipal Income Taxes
Athletes contracted to play for franchises in certain states are required to shell out state and municipal income taxes. This could raise the potential taxes these athletes must pay.
A Limitation On Deductible Items
In the past, athletes and other wealthy individuals could significantly reduce their income tax bills by finding numerous deductions. That said, recent changes to certain tax laws have limited potential deductions athletes often made in recent income tax filings. Common deductions that used to be made but are of no value no include commission and agency fees, cell phone charges, and various entertainment expenses.
Newly Amended Tax Laws
Recent tax laws now place a cap on the deductions an athlete can make for what is labeled SALT (State And Local Taxes). New legislation established a $10,000 limitation on such deductions.
Ways Athletes Can Circumvent These Changes
Though the preceding issues can cost professional athletes a great deal more money in tax dollars, there are ways these individuals circumvent the system. Among the most popular methods, athletes employ to keep more of their fortunes is to play for franchises located in income tax free states. Certain states do not mandate state income taxes including Florida, Washington, Nevada and Texas. Additionally, these professionals might choose an income tax-free state as their primary residences such as Wyoming, Alaska, South Dakota and the nation’s capital Washington D.C.
Though athletes are being paid large sums of money, they are being taxed to a higher extent than your average resident.