Do Athletes Pay Taxes in Every State They Play?

Professional athletes face a unique tax landscape due to earning income across multiple states. This multi-state income taxation, often termed the “jock tax,” means athletes are subject to income tax rules in each jurisdiction where they perform services. Varying state laws require careful attention to where income is earned and how it is treated for tax purposes.

Income Subject to Taxation

Professional athletes earn income from various sources. Their salary or game checks are generally taxable in the states where they physically perform, including compensation for games played, practices, and other team activities conducted within a state’s borders.

Bonuses represent another income category for athletes. Signing bonuses might be treated differently than performance or roster bonuses. A signing bonus, paid for entering a contract and not contingent on future services, may be taxed solely in the athlete’s state of residency, especially if that state has no income tax. Performance bonuses, such as those for reaching playoffs or achieving specific statistics, are considered compensation for services and are subject to taxation in the states where those services were performed.

Endorsement income also falls under state taxation. Endorsement earnings are taxed in the athlete’s state of residence. However, if an endorsement is directly tied to specific in-state appearances or duties, a portion of that income might be sourced to the state where the activity occurred. Other income sources, such as prize money from individual sports events or appearance fees, are taxed in the state where the income-generating activity takes place. Licensing income is also considered taxable.

Apportioning Income to States

States use the “duty days” method to determine the portion of an athlete’s total income taxable within their borders. This method allocates an athlete’s salary and performance-based income based on the number of days spent performing services in a particular state relative to their total duty days. A duty day encompasses any day an athlete is engaged in official team activities, including game days, practice days, team meetings, training camps, and travel days.

The calculation follows a formula: (Number of Duty Days in a State / Total Duty Days in the Taxable Period) x Total Athlete Income = Income Taxable in that State. This approach ensures that a state only taxes income earned for services performed within its jurisdiction. For instance, if an athlete has 200 total duty days in a year and spends 10 days performing services in a specific state, that state would tax 5% (10/200) of their apportionable income.

While the “duty days” principle is applied, states may have variations in how they define or count these days. Some states might include off-season training activities, while others might exclude specific types of travel days. For team sports, this method is used, but athletes in individual sports, such as golf or tennis, have their performance-based income sourced directly to the state where the event occurred. Income not directly tied to in-state performance, like signing bonuses or endorsement income, may be apportioned differently or excluded from the duty day calculation, being taxed instead in the athlete’s state of residence.

State Taxation Variations

Professional athletes are not taxed in every state they play, as state income tax rules, thresholds, and the existence of a tax vary across the United States. Many states levy an income tax, meaning athletes performing services there will be subject to that state’s tax laws. This contrasts with states that do not impose a statewide income tax, such as Florida, Texas, and Washington. Athletes playing in these no-income-tax states would not owe state income tax to those jurisdictions.

Some states implement de minimis rules or minimum income thresholds, below which an athlete may not be required to file a return or pay tax. These thresholds aim to reduce the administrative burden for both athletes and tax authorities when only a minimal amount of income is earned in a particular jurisdiction. The amount of these thresholds can differ from state to state.

While the general framework applies, some states might have specific rules or exemptions tailored to particular sports or events. For example, a state might have distinct taxation guidelines for professional baseball players compared to golfers or tennis players. Beyond state-level taxes, athletes may also encounter local income taxes imposed by certain cities or municipalities. These local taxes add another layer of complexity, requiring athletes to track their earnings and duty days within city limits.

Credits for Taxes Paid

To prevent athletes from being taxed multiple times on the same income by different states, a system of tax credits is in place. States offer a tax credit for income taxes paid to other jurisdictions. This mechanism ensures that income earned in a non-resident state is not taxed twice—once by the state where it was earned and again by the athlete’s state of residence.

An athlete’s state of residence provides this credit for taxes paid to non-resident states. The resident state taxes the athlete’s entire worldwide income, regardless of where it was earned. However, when income is earned and taxed in a non-resident state, the resident state allows a credit against its own tax liability for the amount paid to the other state.

The credit provided by the resident state is limited. It cannot exceed the amount of tax that would have been owed to the resident state on that same income. This means if the non-resident state’s tax rate is higher than the resident state’s, the athlete may still owe some tax to their resident state on that income. Consequently, athletes need to file income tax returns in their state of residence and in each non-resident state where they meet the filing thresholds.