What is Jock Tax?
No matter the profession, workers are required to pay tax in each state they work. The term “jock tax” has become more popular in recent years as states have chosen to target professional athletes to ensure states are collecting their fair share of tax. Think of jock tax as the state collecting its fair share of tax for the games a player plays or "works" in that respective state.
It's not just states that require workers to pay tax while working in their jurisdiction. Some municipalities, such as the City of Kansas City, also tax every player that earns money in their sports venues.
How Does Jock Tax Work?
The players on a single team can earn millions of dollars per day in taxable income when they travel out of state for a game. That’s an attractive source of tax revenue for state governments, and each state fights for as much of it as they can claim.
Professional athletes must file tax returns for each state that requires jock tax. In a typical season, NFL players file between eight to 12 tax returns each season. NBA players file 16 to 20 tax returns. MLB players file 20 to 25.
When a professional athlete files their annual income tax return, they must split their income across all the different states and cities they played in, depending on how many games, training days, etc., they spent in each state.
The calculation of the jock tax varies by sport, and it’s essential that you consult with a qualified Certified Public Accountant (CPA) to make sure you meet your obligations in each state.
Impacts of State Income Tax
Currently, nine states do not have an income tax, including Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Also, the District of Columbia does not impose tax on non-residents. If an athlete is a resident of one of these states with no income tax, it can save the athlete a substantial amount of tax! This is one reason why Florida, Nevada, and Texas have become popular states of residence for Athletes.
Many states use the duty days method which allocates income based on the ratio of duty days an athlete is present in a state to the total number of contractual duty days. Duty days are counted from the first day a player is contractually obligated to report to pre-season training and ends on the last day of the season. For most, their season ends on the last day of the regular season and for some, the day their team is either eliminated from the post-season or wins the league championship.