On the surface, an NFL player’s tax status appears to be similar to that of the majority of individuals. They must pay federal income tax, just like everyone else, but at a far higher rate of 41.95 percent. They must also pay income taxes in the state in which they reside. The AFC South is the most tax-friendly NFL division. Texans players only have to worry about Texas income taxes, since the other three teams in the division don’t have personal income taxes.
In reality, however, NFL players are given many exemptions and deductions from federal income tax that allow them to avoid paying any money toward their government debt.
These exemptions include: the ability to deduct the value of home offices used as primary residences; the deduction of medical expenses over 7.5% of adjusted gross income; the exclusion of child support payments received directly into a taxpayer’s account; and more.
Furthermore, players can reduce their state income tax liability by declaring themselves “exempt” from having to file California returns. While not guaranteed, this exemption may lower a player’s tax bill by up to 20%.
Taxpayers should note that none of these benefits apply if you take them. Also, if your salary falls within certain thresholds, you may be required to file a return even if you’re claiming one or more of these exemptions.
In addition to federal income taxes, NFL players must pay state income taxes in the state of their home club, which includes Louisiana. In some cases, they are also forced to pay taxes to each state in which they play a game, known as the “Jock Tax.” The amount of these taxes is based on how much you make and varies from state to state. Some states may even impose additional taxes for professional athletes.
State income taxes vary by location within the country. For example, some states such as Nevada and Florida have no state income tax, while others such as California and New York charge high rates. However, wherever an athlete plays, he or she will not be permitted to claim one state as his or her home for tax purposes and another as his or her residence for other reasons. If an athlete tries to do so, he or she will be required to file a form called a “Form 1040” to report their income in both states. The two forms do not match up because they cover different periods of time: One covers the previous year, while the other covers the current year.
Taxpayers have 15 months after the end of their tax year to submit their tax return. If they fail to do so, then they have committed tax fraud and can be subject to penalties. In addition, some states require taxpayers to file returns even if they have no income or deductions to report.
However, NFL clubs as a single entity do not fit within this category and are not exempt from taxation. While the commissioner reports to the league’s 32 club owners, who elect him and pay his salary, he is compensated through the National Football League. Clubs cannot withhold employment taxes from their commisioner because they claim he is an independent contractor.
NFL owners do not receive a salary for their work; they receive compensation in the form of tickets to games, merchandise, and other benefits. However, some owners may have stock options that can be exercised at any time before they expire. As well, there are several multimillion-dollar contracts that get awarded by the league annually.
For example, the Jacksonville Jaguars owner is actually a group of individuals who are all named as defendants in a lawsuit filed by the team against its former commisioner. The suit alleges that these individuals breached their fiduciary duties to the team by making decisions that benefited themselves rather than the Jags.
The NFL has about $9 billion in revenue streams including television rights, sponsorship deals, and sale of items such as parking passes. The league spends about $200 million per year on advertising alone.
Clubs in the NFL are required by law to pay employment taxes out of their own pockets if they have more than 100 employees.
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