As a professional athlete, you’re likely no stranger to complex rules—whether they govern your sport or your finances. One of the most confusing and burdensome of these financial rules is the “jock tax,” a unique tax that targets income earned by athletes and other sports professionals in states where they do not reside. While the concept of the jock tax might seem straightforward, its application is anything but. This article will break down what the jock tax is, how it works, and provide strategies to help you manage this often-overlooked financial liability.

What Is the Jock Tax?

The jock tax is an income tax imposed by states and municipalities on athletes, coaches, trainers, and even team staff who earn income while working in a jurisdiction where they do not reside. The tax applies to both resident and nonresident athletes, with nonresidents being taxed based on the income they earn while playing in that particular state or city.

This tax is calculated by dividing the total number of “duty days” an athlete works in a specific state by the total duty days in a season. This ratio is then applied to the athlete’s total income to determine how much is taxable by that state.

For example, let’s say a basketball player earns $10 million a year and spends 41 out of 82 games playing in California. California would tax 50% of that income, or $5 million. With California’s highest tax rate of 13.3% in 2024, the player would owe $665,000 in taxes to California alone. This doesn’t include other states where the player might also owe taxes.

The Origins of the Jock Tax

The modern jock tax can trace its roots back to the 1991 NBA Finals between the Chicago Bulls and the Los Angeles Lakers. After the series, California taxed the income of the Bulls’ players and staff for the days they spent in Los Angeles. In response, Illinois enacted its own jock tax, famously known as “Michael Jordan’s Revenge,” targeting athletes from states that imposed such taxes on Illinois athletes. Today, 21 states and several major cities levy a jock tax.

Who Does It Affect?

While professional athletes are the most common targets of the jock tax, it also affects other sports professionals such as coaches, trainers, broadcasters, and even scouts. Anyone who earns income while working in a state or city where they do not reside could be subject to this tax. Even minor league players or team staff who earn modest incomes might find themselves on the hook for taxes in multiple states.

Common Misconceptions About the Jock Tax

One common misconception is that the jock tax only applies to athletes in high-profile sports like the NFL, NBA or MLB. In reality, it can apply to any athlete, regardless of their sport or income level, as long as they earn income while working in another state. Another misconception is that the jock tax only affects those with high earnings. However, even lower-paid athletes or team personnel can be significantly impacted due to the complex and often costly compliance requirements.

How to Manage and Minimize Jock Tax Liability

Managing jock tax liability requires careful planning and record-keeping. Here are some strategies to help minimize your tax burden:

1. Strategic Scheduling: Work with your team, agent, and financial advisor to plan your schedule in a way that minimizes time spent in high-tax states. For example, try to limit the number of days you spend in states with high tax rates like California.
2. Diligent Record-Keeping: Keep detailed records of your duty days, including travel, training, and game days in each state. This documentation will be crucial in accurately calculating your jock tax liability and can be used to dispute any inaccuracies.
3. Utilize Deductions: Make sure you take advantage of all available deductions, such as travel, equipment, and training costs. These deductions can significantly reduce your taxable income.
4. Leverage Tax Credits: Investigate whether you qualify for tax credits, such as the Earned Income Tax Credit (EITC) or the Child Tax Credit (CTC). These credits can help reduce your overall tax bill.
5. Work with a Tax Professional: Given the complexity of the jock tax, it’s essential to work with a financial advisor or tax professional experienced in managing taxes for athletes. They can provide personalized advice and ensure that you comply with all state and local tax laws, potentially saving you thousands of dollars.

Conclusion

The jock tax is a complicated and often costly aspect of an athlete’s financial life. By understanding how it works and implementing strategies to manage it, you can reduce its impact on your finances. Don’t let the jock tax catch you off guard—start planning now to ensure that you keep more of your hard-earned money. Working closely with financial professionals like Navalign Wealth Partners can help you understand the intricacies of the jock tax, navigate these challenges, and maintain your financial well-being both during and after your athletic career.