Do Athletes Pay Taxes in Each State?

Professional athletes face unique tax obligations due to frequent travel and performance in various states. This multi-state taxation, commonly called the “jock tax,” means athletes are subject to income tax not only in their state of residence but also in states where they compete. Their complex work schedules across different jurisdictions create distinct challenges for managing tax liabilities.

Understanding Multi-State Taxation for Athletes

States assert their right to tax an athlete’s income through “nexus,” a sufficient connection or presence within a state. For athletes, this connection is established when they physically perform services within a state’s borders, such as playing a game or participating in a team practice. This principle allows a state to tax non-residents on income earned from activities conducted within its jurisdiction.

The allocation of an athlete’s income to specific states is determined through “income sourcing.” This process attributes a portion of their total earnings to each state where services were performed. The underlying principle is that income should be taxed where it is earned, regardless of where the athlete resides. A portion of an athlete’s salary and certain bonuses tied to performance in specific locations becomes subject to the tax laws of each state they visit for work.

Calculating Taxable Income Across States

The most common method states use to determine the portion of an athlete’s income subject to tax is the “duty days” or “performance days” method. This approach allocates an athlete’s total annual compensation based on the number of days spent performing services in a particular state compared to their total duty days for the year. Duty days encompass all days an athlete is required to be available to their team, including game days, practice days, team meetings, and travel days.

For example, if an athlete earns a $10 million annual salary and has 200 total duty days in a year, and they spend 10 duty days in State A, the income allocated to State A would be $500,000 ($10,000,000 (10/200)). This allocated income is then subject to State A’s income tax rate. This calculation typically includes base salary, performance bonuses, and certain signing bonuses. Endorsement income, however, is generally not subject to the jock tax unless directly tied to team performance or duties performed in specific states.

State-Specific Tax Rules and Exemptions

While the “duty days” method is widely adopted, the specific application of income tax rules for athletes can vary significantly among states. Some states implement “de minimis” rules, which establish minimum income thresholds or a minimum number of duty days below which non-resident athletes are not required to file or pay tax. These rules are designed to reduce the administrative burden for both athletes and tax authorities when the income earned in a particular state is minimal.

Conversely, states without a general state income tax, such as Florida or Texas, do not impose a “jock tax” on income earned within their borders. This provides a tax advantage for athletes who establish residency in these states, although income earned in other states with income taxes remains subject to those states’ rules.

Filing Requirements and Tax Credits

Professional athletes are typically required to file multiple state income tax returns in addition to their federal return, often corresponding to each state where they performed services and earned income. This can result in numerous filings, with some athletes potentially filing over a dozen non-resident state income tax returns annually. Maintaining accurate records of travel schedules, game logs, and practice days is therefore essential for proper income allocation and compliance.

To prevent athletes from being taxed twice on the same income by different states, a crucial mechanism is the state tax credit for taxes paid to other states. An athlete’s home state, where they are a resident, generally provides a credit for income taxes paid to other states. This credit typically offsets the home state’s tax liability on the income earned elsewhere, up to the amount that would have been owed to the home state on that income.