Taxes aren’t the most exciting thing in the world, but we thought if we combined America’s favorite pastime with taxes, maybe things would be a little more interesting. We thought it would be fun to dive into the world of NFL players and the ways the new tax law affects their deductions.
The Tax Cuts and Jobs Act will give NFL players a decently sized tax reduction in their federal income taxes of 2.6%. With the average NFL player makes about $2.5 million a year, the new tax reduction means the average NFL player is pocketing an additional $65k a year. Sounds pretty great right? Unfortunately for NFL players, this comes at a cost, as they will no longer be able to deduct the fees they pay to their agents.
Of course, this raises a question of how much does an NFL agent make? If the NFL agent is representing back-up quarterback Landry Jones for the Pittsburgh Steelers, that agent may not cost a ton as they are taking home a max of 3% of his annual salary per the NFL Players Union agreement. When Landry Jones files his taxes for 2018, he will claim $2.2 million for his salary. With the new tax bracket, Landry will be saving an additional $44k a year. When he’s filing that federal tax return though, he will not be able to deduct his agent’s 3% fee which is a grand total of $66k. So when all is said and done with the new tax bill, Landry is coming home with less money to write off than he did before by about a $22k difference.
Let’s look at another contract. This time we are going to look at newly signed quarterback of the Minnesota Vikings, Kirk Cousins. Kirk’s new contract is a 3yr/$84 million-dollar deal so we will be working with much bigger numbers on this example. Under the new tax law, Kirk Cousins is now pocketing an additional $728k, a bit more than Landry Jones. Now how about Kirk’s agent that negotiated the very big deal? Well before the tax law, Kirk would be able to write off his agent’s fee of $840k, but now he can’t deduct that expense. The difference here is when Kirk files his tax return, there will an additional $112k that the IRS will view as income for Kirk. Meaning Kirk will be taxed on an additional $112k each year, an amount he used to write off.
There’s been a lot of discussion about the new tax law being a huge tax break to the wealthy and it is in a lot of ways. Just make sure that you’re not around any NFL players when you talk about all of the new tax breaks they’re receiving, or in this case, NOT receiving.
If you have questions about how the new tax law affects you and if you will end up saving money, Polston Tax can help. Our team of Tax Attorneys can help you navigate the tricky tax law and how it can benefit you. Call us today at 844-841-9857 or click below to schedule a free consultation.