Do Professional Baseball Players Have to Pay State Taxes?

In June of 2019, my son Jake Herbert, was drafted out of high school to play for the Boston Red Sox. For Jake, and for our family, it was a dream come true. His first season was spent in Fort Myers Florida (a tax free state) in rookie ball however by his last season, he was promoted to the Salem Red Sox in Virginia. When he relocated to play for his new team, it was to his surprise that even with a promotion, his paycheck became smaller. After his first check, he called me with quite a few questions about state taxes. 

Are Professional Baseball Players Safe from State Taxes? It’s a question that Jake and many aspiring athletes have pondered. Well, in this article, we will explore the intricacies of state tax laws and how they apply to professional baseball players.

While some may assume that professional athletes are exempt from state taxes due to their elite status, the reality is quite different. In fact, professional baseball players are subject to state taxes in nearly every state in which they play games. This means that each paycheck they receive is subject to state income tax, regardless of their residency.

Understanding the complex web of state tax laws is crucial for both players and fans alike. By delving into the specifics of the tax codes, we can gain insight into the financial implications for these athletes and how it may impact their bottom line.

So, if you’ve ever wondered about the ins and outs of state taxes for professional baseball players, this article is for you. Stay tuned as we dive into the truth behind the tax exemptions (or lack thereof) for our favorite ballplayers.

Understanding state taxes for professional baseball players

While some may assume that professional athletes are exempt from state taxes due to their elite status, the reality is quite different. In fact, professional baseball players are subject to state taxes in nearly every state in which they play games. This means that each paycheck they receive is subject to state income tax, regardless of their residency.

According to the tax laws in the United States, income earned by individuals is generally taxable in the state where it is earned. For professional baseball players, this means that they are subject to state taxes in each state where they play games. This can create a complex tax situation, especially for players who travel frequently for away games.

The “Jock Tax” phenomenon: How it affects professional athletes

The concept of the “Jock Tax” is one that has gained significant attention in recent years. This term refers to the practice of states imposing taxes on professional athletes for income earned within their borders. The idea behind this tax is that professional athletes, who earn substantial incomes, should contribute to the state’s revenue.

The “Jock Tax” is not limited to baseball players but applies to athletes in various sports. The amount of tax owed by players depends on several factors, including the state’s tax rate, the number of games played in that state, and the player’s income. The tax is typically calculated based on a proration of the player’s income in relation to the total number of games played.

Determining residency for tax purposes

One of the key factors in determining the tax liability for professional baseball players is their residency. Residency plays a significant role in state tax calculations, as it determines which state has the right to tax a player’s income.

For tax purposes, residency is generally determined by the player’s “domicile.” Domicile refers to the state that a player considers to be their permanent home, where they have the most significant connections and intentions to return. However, establishing domicile can be challenging for professional athletes who spend a significant amount of time on the road.

State tax implications for home and away games

Professional baseball players face unique challenges when it comes to state taxes due to the nature of their profession. Unlike athletes in other sports, baseball players play a significant number of games on the road, which can complicate their tax situation.

For home games, players are subject to state tax in the state where their team is based. This is typically their “resident state” or the state where they have established domicile. The income earned from home games is subject to that state’s tax rate.

When it comes to away games, players are subject to state taxes in the state where the game is played. This means that for each away game, players must file a non-resident tax return and pay taxes to that state. The tax liability for away games depends on the state’s tax rate and the player’s income earned within that state.

Key states with favorable tax laws for professional baseball players

While most states impose taxes on professional baseball players, there are a few states that have more favorable tax laws for athletes. These states either have a lower tax rate or provide exemptions for income earned by professional athletes.

States such as Florida and Texas are popular among professional baseball players due to their lack of state income tax. Players who reside in these states and play for teams based in other states can potentially save a significant amount of money on their tax liabilities.

Strategies to minimize state tax liabilities

Professional baseball players, like any other taxpayer, have the opportunity to employ strategies to minimize their state tax liabilities. These strategies can include careful tax planning, maximizing deductions, and taking advantage of tax credits.

One common strategy is to establish residency in a state with more favorable tax laws. By changing their domicile to a state without state income tax, players can potentially reduce their overall tax burden.

Another strategy is to carefully track and document their travel expenses. Professional baseball players can deduct certain business-related expenses, such as travel, meals, and lodging, which can help reduce their taxable income.

Off-field income and its impact on state taxes

Professional baseball players often earn a significant portion of their income from endorsements, sponsorships, and other off-field activities. The tax treatment of this income can vary depending on the state.

Some states may consider off-field income to be allocable to the player’s resident state, regardless of where the income is earned. This means that even income earned outside of their resident state may be subject to state taxes.

However, other states may have more favorable rules regarding off-field income. For example, some states may only tax income if it is earned within their borders, providing players with an opportunity to minimize their tax liabilities on off-field earnings.

Hiring a tax professional for athletes

Navigating the complex world of state taxes can be challenging for professional baseball players. With the potential for tax liabilities in multiple states, it is crucial for players to seek the guidance of a qualified tax professional.

A tax professional with experience in working with professional athletes can help players understand their tax obligations, optimize their deductions, and ensure compliance with state tax laws. They can also provide valuable advice on residency planning and strategies to minimize tax liabilities.

The Bottom Line: Navigating the state tax landscape for professional baseball players

In conclusion, professional baseball players are not exempt from state taxes. They are subject to state income tax in nearly every state where they play games, regardless of their residency. The “Jock Tax” phenomenon has made it necessary for players to carefully navigate the complex web of state tax laws.

Understanding the implications of state taxes for professional baseball players is crucial for both players and fans. Players need to be aware of their tax obligations and employ strategies to minimize their tax liabilities. Fans can gain insight into the financial implications of state taxes and appreciate the challenges faced by their favorite ballplayers.

Navigating the state tax landscape is not an easy task, but with the help of qualified tax professionals, professional baseball players can ensure compliance with tax laws and make informed financial decisions. So, the next time you watch a game and cheer for your favorite player, remember that they too must navigate the complexities of state taxes while chasing their dreams on the field.

Sources:

[Thehustle.co – Why athletes (and some remote workers) owe a ‘jock tax’ wherever they go] (https://thehustle.co/why-athletes-and-some-remote-workers-owe-a-jock-tax-wherever-they-go/)

[The Motley Fool – Here’s How Professional Athletes Pay Taxes](https://www.fool.com/the-ascent/taxes/articles/heres-how-professional-athletes-pay-taxes/)