State Tax Strategies for Athletes and Entertainers: Residency and SALT Deduction Limitations

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A


Conducted on Thursday, June 20, 2019

Recorded event now available

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Program Materials

This webinar will discuss how performers are taxed in varying states, mitigating the impact of state taxes, and the effect of tax reform on athletes and entertainers. Most individuals live and work in the same state and file a federal and a single state return. Professional athletes and entertainers are potentially subject to tax in every state an event occurs. The panel will cover the "jock tax" and the two conventional methods of allocation, duty days and game days. They will discuss strategic relocation, taxation of endorsements and signing bonuses, and the effect of tax reform on these celebrities.

Description

For athletes, most states use "duty days" to apportion earnings. Duty days may include practice, a game, a team meeting or a media appearance. Other states use a "games day" approach. Even when states use the same method, there are nuances in the calculations and definitions used. Also, there are injury, inactive and suspension days to consider.

Where a team plays changes throughout the season; the locations and days of events are unknown until the year ends which makes planning difficult. Local and city taxes add another level of complexity to the "jock tax." Regardless of where services are rendered and the methodology used, the resulting calculations are cumbersome and the returns filed are numerous. At the same time, these complexities cannot be overlooked since performers are easy targets for state and local taxing agencies.

Tax reform brought about the lowering of the top tax tier from 39.6% to 37% which can only serve to benefit successful professional athletes and entertainers. The same top bracket performers who benefit from the federal drop are hit hardest by the cap on the state tax deduction at $10,000 unless they reside in one of only seven states without a state income tax.

The disparity in the impact of these changes on a given performer is primarily a product of the state where most events (performance, game, tournament, etc.) take place. Under tax reform, a client who is a hockey player, with an average annual salary of $3 million, could see a decrease in tax of $80,000 playing for the Dallas Stars but owe an additional $62,000 playing for the New York Islanders.

Pay for services is only one of many types of income earned and taxed to celebrities. Often more consequential are signing bonuses, endorsement income and SWAG. Each performer's situation is unique; however, steps can be taken to lower state taxes as well as the impact of tax reform.

Listen as our panel of experts explains the nuances of state taxation of performers, including the taxation of earnings unique to the services they provide and how to reduce the overall burden of taxes paid by these individuals.

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Outline

  1. The jock tax
    1. Duty days
    2. Game days
  2. Residency
    1. State tax nuances
    2. Relocation
  3. Tax considerations for other earnings
    1. Endorsements
    2. Signing bonuses
    3. Other
  4. Mitigating the effect of tax reform on performers

Benefits

The panel will review these and other important issues:

  • Impact of tax reform on athletes and entertainers
  • Calculation of the jock tax
  • Nuances of state taxation
  • Strategizing residency
  • Taxation of unique earnings

Faculty

Pogroszewski, Alan
Alan Pogroszewski

Associate Professor
St. John Fisher College

Mr. Pogroszewski is an Assistant Professor of Sports Studies at St. John Fisher College and the President of his own...  |  Read More

Smoker, Kari
Kari Smoker

Associate Professor and Graduate Director
SUNY, The College at Brockport

Ms. Smoker, JD, MS Taxation, is an Associate Professor in Accounting at the State University of New York (SUNY), The...  |  Read More

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