Why Hitting A Home Run To Uncle Sam Is Tough For MLB Players

April 4, 2016

(Paid) Evan LongoriaMajor League Baseball is the sport in the U.S. with the biggest contracts for players, particularly big-shot sluggers who hit home runs and pitchers who paint the corners of the strike zone with ease. While many MLB player salaries barely fit on a paycheck, Uncle Sam is always lurking in the ballpark in search of his cut of what Clayton Kershaw or Bryce Harper owe in taxes.

Federal, State, & Local Income Taxes For MLB Players

Regardless of which U.S. state you call home, you’re on the hook for paying federal income taxes to the IRS. The amount you owe depends on the amount you earn each year – or if you’ve overpaid at some point. Hence, MLB players are responsible for filing federal returns each year like the rest of us.
As for state taxes, there is some gray area for pro ballplayers. There are 17 U.S. states in which MLB teams are located. Fourteen of these states have a state income tax on the books. This means MLB players who play in games – or even travel with the team if injured or not starting – must file a return for each state they visit if it has a state income tax.

Finally, there are 6 MLB cities around the country that also impose a city tax for income earned within their city limits.

While it is extremely rare to find an MLB player who has to file the maximum number of income tax returns, it’s still a possibility. A player who resides in a state that imposes a state income tax and plays for an MLB team based in another state could wind up having to file a federal income tax return, up to 15 state tax returns, and a handful of city tax returns – according to AccountingWeb.com.

The Jock Tax For MLB Players

The so-called jock tax is a form of income tax faced by most MLB players who travel around the country to take on their rivals. The jock tax is levied on individuals who conduct a specific trade when visiting a certain city or state for income-earning reasons.

Because no city or state has the resources to carefully track income earned by every single visitor, the individuals who wind up with a target on their backs from local tax authorities are those who work in high-profile professions and are also in the highest income tax brackets, such as MLB players. This is because their work schedules and salaries are publicly known.

A city or state tax authority can easily determine how much a player for the New York Yankees makes – and then find out when he is playing in Boston, Chicago, or Los Angeles in order to collect this jock tax from the player’s income earned in that particular location.

More specifically, the jock tax can be calculated by how many so-called duty days an MLB player spends participating in a game function. This may include an actual game on a Wednesday night, pre-game meetings, or batting practice time held in preparation for a game. Keep in mind that a team may arrive in a city the day before a scheduled game for all of these purposes, so this plays into taxation as well.

Treaty Protection For MLB Games In Canada

While MLB players face countless tax requirements, there is one perk worth noting. Pro baseball players enjoy traveling across the border to Canada to play the Toronto Blue Jays. That’s because there is treaty protection that exempts them from paying any Canadian income taxes on the money they earn while playing games there. Plus, Blue Jays players only incur income taxes in their country of residence, whether it is Canada or the U.S.

The Bottom Line on Taxes For MLB Players

The average salary for an MLB player currently stands at about $3.5 million. This amount automatically puts most pro baseball players in the highest income tax bracket, which is currently taxed at 39.6%. While members of an MLB team’s minor league system may earn much less than the big-time starters, most baseball players owe huge amounts of money to the IRS and other tax authorities each year.

So, while a pitcher like David Price may have signed a deal worth over $200 million with the Boston Red Sox, don’t forget about the large cut of that money that winds up in the hands of the government.

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