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State taxes take a big bite out of most NFL players’ incomes

September 5, 2013


Joe_Flacco_pre-game-workout_09232012_Wikimedia-CommonsFootball fans will see tonight whether Baltimore Ravens quarterback Joe Flacco deserves the record $120.6 million deal he signed following the team’s win in Super Bowl XLVII.

What we won’t see during the 2013 NFL season kickoff game between the Ravens and Denver Broncos is that Flacco’s highly publicized salary is really not tops in the NFL.

Half (or more, depending on the team’s playoff schedule) of the games that the Super Bowl MVP will play are in Maryland.

That means he’ll owe the Old Line State’s top income tax rate of 5.75 percent on his home-field earnings. Then there are the additional local income taxes collected by Maryland‘s 23 counties and Baltimore City.

When you add the state taxes to Flacco’s federal bill, which includes the top ordinary income tax rate of 39.6 percent and most likely the 3.8 percent net investment income tax that took effect this year for high earners as part of Obamacare, the Ravens’ play caller will have a marginal tax bill of more than 50 percent.

Americans for Tax Reform, the group founded by no-tax pledge creator Grover Norquist, estimates that Flacco’s combined marginal tax rate will be 51.98 percent.

Brees better paid, tax-wise: That rate, says the anti-tax group, will knock Flacco off the top of the NFL salary ladder.

By ATR’s accounting, Flacco’s Maryland location means he will pay $1.72 million more a year in taxes on his estimated $20.1 million annual salary than a similarly paid player on the Dallas Cowboys, located in the no-income-tax state of Texas.

While Flacco technically still is the highest paid NFL player, ATR’s calculations say that his New Orleans Saints counterpart Drew Brees earns more by virtue of a high salary in a lower taxed state.

Brees also makes around $20 million a year, but the NO QB’s marginal combined federal and Louisiana tax rate is 49.4 percent, according to ATR.

All players need tax planning: K. Sean Packard, CPA and Director of Tax at OFS, elaborates on how tax decisions can literally save NFL players fortunes.

As a long-suffering Cowboys’ fan, I was intrigued by Packard’s (who also is known as @AthleteTax on Twitter) discussion of Tony Romo’s compensation restructuring this off season.

By reshuffling things so Romo gets a $10
million signing bonus plus a base of $1.5 million instead of the originally negotiated $11.5 million base, Packard says the Dallas quarterback ends up making a lot more after taxes.

I just want him to earn it by winning some playoff games!

NFL draftees also hit by taxes: It’s not only the highly-paid veterans who must consider taxes.

When taxes are taken into account, the top pick in the 2013 NFL draft falls to number two in compensation.

Eric Fisher, selected first by the Kansas City Chiefs, faces a Missouri state income tax of 6 percent, plus Kansas City local tax of 1 percent. The offensive tackle got a signing bonus of $719,200 more than the
number two pick, but state taxes will claim roughly $894,000 in his
first year. Combining federal, state, and city taxes, he’ll net about
$8.1 million.

Meanwhile, the number two NFL draftee this year, offensive tackle Luke Joeckel, will play for Jacksonville, Fla. So while Joekel’s deal is slightly less than Fisher’s, the new Jaguar gets the bonus of no income tax in the Sunshine State.

Even with the jock taxes Joeckel will pay on some road games, his net income will be $8.4 million, or about $284,000 more than Fisher, at least for the
2013 contract year.

Maybe that bottom line tax analysis will help ease some of the anger Joeckel still has about being picked second.

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The More Tax Posts tab at the top of this page will take you to, well, more tax posts. You also can search below for a tax topic. 

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TAX-SAVVY WAYS 
TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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