For professional athletes, the allure of high salaries, endorsement deals, and media contracts comes with unique tax challenges. It leads to a complex landscape of tax filings, multistate obligations, and pitfalls. Without careful planning, even substantial earnings can lead to costly mistakes.

Income Streams for Athletes

Athletes often receive compensation from a variety of streams:

• Base salary or contract pay
• Game and performance bonuses
• Appearance fees and event payments
• Endorsements, licensing, or marketing contracts

Each of these sources may be taxed differently depending on jurisdiction, timing, and contractual terms. Mismanaging a stream of income can significantly impact your entire financial picture.

Paying Taxes Where You Earn Your Income

One of the main reasons why tax planning becomes challenging for athletes is because of non-resident tax laws. The jock tax is the informal name for the income tax that states and cities levy on non-resident professional athletes and team personnel for income earned while working in their jurisdiction. It’s not a unique tax for athletes but an application of existing non-resident income tax rules and could result in owing taxes in every jurisdiction athletes play or generate income in, even if they don’t reside there.

Some states use a “duty days” method, taxing you based on how many workdays you spend in that locale (including games, practices, or team obligations). The other approach states may take is the “games played” method where your tax is based on the number of games played in a state, relative to your total games.

These methods vary across states and reconciling them can become complex and costly, especially with differing tax rates and residency rules.

Pitfalls Athletes Frequently Face

With juggling between travel, contracts, and multiple revenue streams, several common mistakes emerge:

• Inadequate record-keeping: Failing to log travel dates, game locations, and income sources makes multi-state tax filings inaccurate.
• Residency ambiguity: Athletes often split time between home states and play states, risking double taxation if residency isn’t clearly defined.
• Missing or late filings: With many states in play, deadlines can slip and trigger penalties, interest, or audits.
• Overlooking municipal or city taxes: Certain cities and localities impose their own income taxes, making it easy to miss without expert insight.
• Neglecting deferred or bonus income: Endorsement deals, signing bonuses and deferred contracts have nuanced tax implications that require forward planning.
• Ignoring international tax exposure: For athletes competing abroad, foreign tax laws and treaties must be considered to avoid overpayment or noncompliance.

We can help

For athletes, success isn’t just earned on the field, it’s built through smart financial decisions off it. With the right team behind you, you can stay focused on your game while experts handle the tax details that impact your future

At DDK, our Estate Planning, State and Local Tax, and Bookkeeping teams are designed to support your wealth-building strategy. We tackle complex, multi-jurisdictional taxes early and coordinate with your financial and legal advisors to ensure your tax plan works as hard as you do.

Let’s talk today to build a financial strategy that keeps you performing at your best—on and off the field.