Football season just kicked off and fans are keenly aware that the players out there are raking in more money in one season than most people will make in a lifetime. New Orleans Saints quarterback, Drew Brees for instance, is averaging $20 million a year. Most team members don’t make anywhere near that, but rest assured they are well paid.
Big Bucks Big Taxes
NFL players also have enormous out-of-pocket expenses. Naturally they can write off all the usual items as long as they qualify. But what else can they deduct?
- Agent fees, which are generally a percentage of a player’s income. These max out at 3% but for other income such as endorsements the fees are higher.
- Ground transportation costs (taxis, parking fees, and tolls) related to away-games, training, meeting with agents, scouts, trainers, etc.
- Fines for acts which do not violate public law.
“I am often asked if player fines are deductible,” said CPA Robert A. Raiola. “For example a fine for speeding is not deductible but a fine for being late to practice is deductible because it violates team policy, but not public law.” Many people believe fines are deductible because some leagues, including the NFL, donate this money to charity. “That’s a common misconception. Whether the fines are donated or not, they are deductible to the athletes,” said Raiola. Raiola is head of the Sports & Entertainment Group for the New Jersey-based accounting firm of Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC.
Additional expenses include:
- Athletic equipment related to his sport. Also deductible are training classes and general workout equipment classes which are part of his overall athletic development.
- Therapeutic massages may be deductible.
- Reasonable costs of chiropractic care and body maintenance fees, during the season.
- Temporary housing, for a definite time period, such as for rehab after an injury.
- Rookie expenses.
Rookies are generally expected to take the team or a position group out for meals at times. It’s considered a normal business expense in the NFL, and generally it is deductible, subject to the standard 50% meals and entertainment limit.
The Lesson?
The deductions are out there, but it takes the expertise of a trained professional to get the best tax results. That’s true for anyone who receives a large sum of money from any source, such as a lottery win, a legal settlement, an inheritance, life insurance, a gift. You’ve heard the stories of people who were suddenly rich, rolling in money. A few years later they are flatbroke, bankrupt, in tax debt, and with no idea how it happened.
The problem was, they had money coming out their ears, but what they didn’t have was the financial sophistication to handle the money well, guard their assets, and minimize the tax bill. For anyone who gets a large sum of money from any source, the first dollar spent should be to get a good financial professional on your side. It’ll be worth the cost.
Photo: Matt McGee