You’ve heard of the celebrity lifestyle, but have you ever considered the celebrity tax bill? For professional athletes, the burden can be particularly hefty, especially when it comes to the infamous “Jock Tax.”
What is the Jock Tax?
Essentially, it’s a state income tax imposed on athletes and entertainers who earn money in a state where they don’t reside. Think of it as a “visiting tax” for high-profile individuals. If a basketball player from Texas plays a game in California and earns a salary or endorsement money while there, California can tax that income.
Why is it called the Jock Tax?
The term originated in the early 1990s when the Chicago Bulls, led by Michael Jordan, defeated the Los Angeles Lakers in the NBA Finals.To recoup revenue lost from the Lakers’ defeat, California implemented a tax on the visiting team’s income. While the tax applied to all non-resident entertainers, the term “Jock Tax” stuck.
How does it work?
States calculate the Jock Tax based on the number of days an athlete or entertainer is physically present within their borders. The more days spent in a state, the higher the tax bill. This can lead to complex calculations and potential disputes between athletes and state tax authorities.
Impact on Athletes
The Jock Tax can significantly impact an athlete’s bottom line. With games, practices, and promotional events happening in various states throughout the year, the tax burden can add up quickly. Some athletes hire tax professionals to help navigate the complexities and minimize their tax liability.
While the Jock Tax might seem unfair to some, it’s a way for states to generate revenue from non-residents who benefit from their economy. As long as professional sports and entertainment remain popular, the Jock Tax is likely to stay in place.