The jock tax is a colloquialism for income tax levied on visitors who earn money while visiting a city or state. Although this tax is levied on employees and contractors in all professions, it is mostly enforced on professional athletes. Why? Because their salaries are public and tax computation requires little work by state taxing agencies.
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What Is the Jock Tax?
The Jock Tax and Its Origins
The Jock tax is essentially a state taxing system in place for athletes in addition to the regular federal and state income taxes they pay. This tax is calculated based on the number of days the athlete has spent in the state divided by their workdays.
Jock Tax = Days in State / Workdays
Michael Jordan’s Revenge
Professional level athletes can earn extraordinary levels of income, which prompted California to tax Michael Jordan following a victory against the Lakers in the 1991 NBA Finals. Illinois, Jordon’s home state, decided to fight back against this by stating they would also impose the same taxes on players who play in their state. This event has been titled “Michael Jordon’s Revenge”.
How Athletes Get Around Jock Tax
You may have noticed that there are quite a few athletes that reside in Florida. Florida is one of four states that does not currently impose a jock tax. The other three are Texas, Washington, and Tennessee. This is due to the lack of state income tax in general, which allows these players to avoid both the jock and state income taxes they would otherwise pay.
How Does Jock Tax Affect Non-Athletes?
One might think that Jock Tax only affects the players but, in reality it has a huge effect on non-athletes who are also in the sports industry. Team staff members such as equipment managers and team trainers must also pay the jock tax. As you can imagine, this poses a substantial burden on team staff in filing multi-state tax returns and the added tax liability that comes with it, especially since team staff earn far less income than highly-contracted professional athletes.
MBMG Inc. and its staff of professionals have extensive experience dealing with such burdening tax applications as multi-state filing of tax returns. Navigating through federal and state tax codes is what we do best. Our client-focused professionals will guide you through tax compliance while minimizing your tax liability.
Call us today for a consultation at 619-430-2780.
Categories: Tax Deductions, Taxes