Professional Athlete Tax Deductions You Can Take

The financial landscape for a professional athlete is complex. High but often short-lived earning potential, coupled with high work-related costs and frequent travel, creates a complicated tax picture. Unlike a typical salaried employee, an athlete’s ability to deduct expenses is not straightforward and depends heavily on their specific employment arrangement. Understanding these nuances is the first step toward effective financial management during and after a sports career.

The Impact of Employment Status on Deductions

An athlete’s ability to deduct business expenses hinges almost entirely on their employment classification. Most athletes in team sports, such as those in the NFL, NBA, or MLB, are considered employees of their respective teams and receive a Form W-2.

A shift occurred with the Tax Cuts and Jobs Act of 2017 (TCJA), which suspended miscellaneous itemized deductions for W-2 employees. This category previously allowed athletes to write off unreimbursed business expenses like specialized training or agent fees. This suspension is set to expire at the end of 2025, and barring new legislation, these deductions will be available again for the 2026 tax year.

In contrast, athletes in individual sports like golf or tennis are classified as independent contractors. These athletes receive a Form 1099-NEC for their earnings and are considered self-employed, which allows them to deduct all ordinary and necessary business expenses on Schedule C of their tax return.

To navigate the limitations faced by W-2 employees, some athletes form a business entity, such as a personal service corporation (PSC) or a limited liability company (LLC). By structuring off-field activities like endorsements through a business, they can deduct related expenses against that specific income.

Common Deductible Business Expenses

For athletes who are self-employed or have established a business entity, a wide range of professional expenses become deductible. These deductions must be considered “ordinary and necessary” for their profession, meaning the expenses are common in their sport and helpful for their business operations.

• Commissions paid to agents for negotiating contracts and securing endorsements are deductible against the income from those activities. It is important to receive an itemized invoice from the agent that separates fees for W-2 salary negotiation from fees for 1099-income activities.
• Training and coaching costs include payments for specialized off-season training programs, private coaching, facility rentals, and sessions with sports psychologists. These expenses are tied to maintaining and enhancing the skills necessary to compete, so long as they are for the athlete’s profession and not for general health.
• Travel expenses are deductible when an athlete is traveling away from their “tax home” for business. An athlete’s tax home is the city where their team is based. Deductible travel costs include airfare, rental cars, and lodging, and athletes can deduct 50% of the actual cost for meals consumed while traveling.
• Equipment and uniforms not provided by a team or sponsor are deductible. This can include specialized footwear, protective gear, or specific training equipment. The cost of maintaining this equipment, such as repairs or professional cleaning, can also be written off.
• Union and association dues are a deductible business expense for independent contractors. While fines paid to a government are not deductible, fines paid to a private organization, like a sports league, may be deductible for an independent contractor. For W-2 employee athletes, the ability to deduct such fines is currently suspended.
• Legal and professional fees associated with the business side of an athletic career are deductible. This includes fees for attorneys to negotiate contracts, accountants for tax preparation, and financial advisors managing business assets.

Navigating Multi-State Taxation

Professional athletes face a state tax challenge known as the “jock tax.” This is the practice of states and some cities taxing non-residents on income earned while working within that jurisdiction. Because an athlete’s job requires travel, they become subject to the income tax laws of each state where they play.

The core of the jock tax calculation is the concept of “duty days.” States use a formula that divides the number of duty days an athlete spent in that state by their total number of duty days for the entire season. Duty days include all days from the start of preseason training through the final game, encompassing game days, practice days, and required team activities.

For example, if a player has 200 total duty days and spends 10 of those in a state, that state will tax 5% of the athlete’s total salary. This requires an athlete to file multiple state income tax returns.

To prevent being taxed twice on the same income, most states with an income tax offer a solution. Athletes can claim a tax credit on their home state tax return for the income taxes they paid to other states, which offsets the tax owed to their resident state.

Essential Record-Keeping and Documentation

Substantiating tax deductions requires meticulous record-keeping, as the burden of proof rests on the taxpayer. Without proper records, even legitimate deductions can be disallowed by the IRS during an audit.

For every deductible expense, specific documentation is necessary. To deduct agent fees, athletes must keep copies of all contracts and agreements. Invoices and proof of payment, such as canceled checks or bank statements, are needed for all training, coaching, and facility rental costs.

A detailed travel log is necessary for deducting travel expenses. This log should record the dates of travel, the destination, mileage for vehicle use, and the business purpose of each trip. This should be supplemented with itemized receipts for all related costs, including airfare, lodging, and meals.

Itemized receipts are also required for all equipment and uniform purchases. For all business-related expenses, it is a best practice to use a separate bank account or credit card. This helps to clearly distinguish professional expenses from personal spending and simplifies the record-keeping process.