As a professional athlete the fame, fortune, and other perks may cause you to overlook financial management. More specifically, you may be less likely to think about how your increased salary, gifts, and paid endorsements will affect your tax planning, accounting, and bookkeeping once their dream becomes a reality. So, let’s take a look at some of the key things every professional football player should know about football player tax, accounting and bookkeeping.
What Is Involved in Football Player Tax?
NFL players are traditional employees of the teams they play for. Rules dictating tax planning for football players limit the expenses they can deduct on their tax return as employee business expenses.
Some unique things that professional football players may deduct include:
- Agent Fees: These fees usually amount to three percent of the wages the player receives from their team and could include a higher percentage for endorsement income.
- Gym and Training Fees: Professional athletes may deduct training fees, gym fees, and travel fees associated with training.
- Body Maintenance/Chiropractic Care: A reasonable amount of body maintenance expenses, chiropractic care expenses, and similar care expenses may be deductible during the NFL season.
- Local and City Income Taxes: football player tax is complicated because athletes play in several cities. This could require them to file taxes in nine states and federal taxes. Money withheld for city, state, and local taxes is generally deductible.
- Athletic Equipment: Footballs, cleats, weights, and other equipment are considered “ordinary and necessary” for football players to maintain employment with their team. Changes in itemized deduction laws may lead to some professional athletes incorporating themselves to gain a more favorable tax position.
What Is Involved in Bookkeeping for Football Players?
Bookkeeping for football players is important because, although football players earn high salaries, their careers are usually short-lived. CPAs for football players may work with their clients, helping them to plan for a future date when money may not be rolling in so steadily and help deal with football player tax duties.
Accounting for football players includes choosing a proper domicile. For example, does a team’s home state offer tax incentives for top-income earners? If not, a football player’s CPA may recommend their client reside in a state that does not have state taxes, such as Tennessee, Texas, or Florida. Professional football players may be able to reduce the amount of tax they pay on signing bonuses since the signing bonus is allocated to their state of domicile. If they are in a state without an income tax, this could result in massive tax savings.
Residency Tax Rules
Most states have a threshold for the number of days you’re allowed to stay in the state without being liable for taxes. If you frequent a state different from your home state a number of times per year, it is important to track the number of days you’ve spent in a particular state to ensure accurate tax submissions and maximize tax benefits. There is software that can help you track your residency days per state to aid in an accurate and less complicated tax filing process.
Find out all you need to know about tax residency rules and requirements here.
Save Money with Outsourced Tax Planning
If you think you may be paying too much taxes, you can talk to us about strategic tax planning. Fusion CPA can also guide you through the process of choosing the best accounting software for your business.
Helping Professional Football Players Take a Long-Term View
What seems like a high income might not be that high when it is amortized over a typical career. For this reason, financial advisers for professional athletes focus on maximizing deductions to mitigate the high taxes experienced by players who earn a lot of income within a brief amount of time. Therefore, accounting for football players should be goal-based, ensuring that early success does not create poor financial habits that will be detrimental long term.
Understandably, a player who attains a level of success may want to give back to their community through charitable giving. CFO financial advisory for football players may help them give to their community while maximizing tax savings derived from charitable donations. CFO advisors understand the unique challenges our clients face and focus on improving and protecting the financial side of their life, allowing them to concentrate on what they do best.
Your Financial Future
Our team of experienced accountants is here to help you learn how to take advantage of tax credits and preserve your wealth while creating proactive tax planning solutions that may benefit you now and years down the road.
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.