The jock tax is a unique state income tax rule that requires workers to pay taxes in every state where they earn money—even if they don’t live there. Originally aimed at professional athletes who traveled to compete, it now affects a much wider group: entertainers, keynote speakers, business executives, and anyone whose work crosses state lines.
Understanding how the jock tax works is essential for staying compliant, avoiding penalties, and planning ahead to keep more of your earnings.
The Jock Tax in a Nutshell
The jock tax is a nickname for the income tax levied by some states and cities on visiting professionals. This tax is famously levied on athletes and entertainers. However, anyone who works across state lines is a potential candidate.
Confusion over the complexities of the jock tax puts you at risk of surprises and even legal problems come tax season. That’s why many multistate workers get expert help from a professional in sports accounting services. Whether you’re a professional athlete, entertainer, or simply earn money in multiple states, an experienced CPA will guide you on minimizing your tax liability while staying compliant.
History of the Jock Tax
The term “jock tax” was coined in 1991 when the state of California taxed the Chicago Bulls’ earnings after they won the NBA Finals against the Los Angeles Lakers. The state of Illinois passed its own version in response. This was nicknamed “Michael Jordan’s Revenge.” Their version imposed tax on visiting athletes, including NBA players from California.
These high-profile cases made the jock tax famous. However, the legal framework for taxing nonresidents had already existed for decades. California simply put it into the spotlight by enforcing it aggressively against pro athletes.
Over time, other states saw the revenue potential and began implementing or enforcing similar rules. Today, most U.S. states with an income tax, and even some cities, collect taxes from visiting athletes and other high-income professionals based on the number of “duty days” they spend working there.
How the Jock Tax Works
Let’s imagine an NFL player who earns $5 million per year. If 10% of their total working days (including games and practices) were in a state that charges nonresident income tax, that state taxes around 10% of the player’s total salary at their state income tax rates.
Each state uses an apportionment formula to calculate the portion of an athlete’s or performer’s income subject to jock tax. Many states require athletes to record the number of duty days they’ve spent in that state. They must then calculate the ratio of duty days in that state to the total number of duty days for the year.
Tip: Consult a CPA with experience in multistate tax services to explain state-specific differences when calculating the jock tax so you apply these correctly when filing your taxes.
Which Earnings Are and Aren’t Included in the Jock Tax
Earnings subject to the jock tax include the annual base salary, plus any performance or signing bonuses included in a player’s or worker’s contract. However, income made from endorsements is typically exempt. This is because it’s not directly linked to performing services in any given state.
States That Enforce the Jock Tax
Most states, as well as many large cities with professional sports teams like Kansas City, Pittsburgh, and Detroit, enforce the jock tax. The nine states that don’t levy state income tax don’t enforce the jock tax. These are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Who Pays the Jock Tax?
The jock tax often applies to the following professionals, as well as others that regularly cross state lines:
- Professional athletes
- Coaches or other team staff
- Broadcasters
- Entertainers
- Keynote speakers
Many workers subject to the jock tax, like scouts or lower-level trainers, don’t earn much more than the national median income. This makes it harder for them to absorb the extra tax burden.
Finding strategies to reduce your tax bill and the potentially substantial compliance costs associated with the jock tax is therefore a priority for all cross-border workers. This is especially true if you spend a significant number of days each year in high-tax states.
Tip: Make sure you’re taking advantage of the top tax deductions for high earners, like retirement and charitable contributions, to keep as much of your hard-earned money as possible.
Non-Resident Foreign Athletes and Artists
According to the IRS, nonresident alien artists or athletes who perform services in the U.S. are subject to tax on income made in the United States. This includes any compensation for performances, merchandise sales, endorsements, royalties, or any other income earned from (or related to) the event.
These workers must file a U.S. federal income tax return to report and then pay any U.S. tax they owe.
Strategies for Minimizing Your Jock Tax Obligations
Follow these strategies to get the best deal possible on jock taxes:
1. Consult an Experienced CPA
A CPA with experience in sports accounting and traveling professional income tax is best placed to navigate the complexities of the jock tax. They will assist you with understanding state-specific rules and maximizing deductions and credits like the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC).
2. Keep Detailed Records
Keep accurate records of duty days and any income you earn on those days. This information will support your tax filings and ensure compliance with different state laws.
3. Understand State Laws
There is some difference in how states calculate their jock tax. Ensure your CPA understands how the applicable state and local taxes work to ensure proper filing and avoid legal challenges.
4. Plan Your Schedule Strategically
Reducing the time spent in high-tax states will reduce your jock tax liability. Plan your travel schedule (where possible) to avoid spending excessive time in the states that have the biggest impact on your tax bill.
Optimize Your Multistate Tax Burden
The jock tax is no longer just a concern for star athletes but for a wide range of professionals whose work takes them across state lines. Understanding how this tax works, which states enforce it, and how to strategically manage your schedule and finances allows you to optimize your overall tax burden.
Work with an experienced CPA who specializes in sports accounting to navigate the complexities of varying state laws smoothly and take advantage of every deduction or credit. The right professional will keep you compliant and proactively reduce your exposure to high-tax jurisdictions.
