The Capitals are just one win away from hoisting the Stanley Cup for the first time in franchise history in the 2018 Stanley Cup finals against the Golden Knights. But with Game 5 set to be on Nevada soil, the Golden Knights are hoping they’ll be able to dig themselves out of their current series deficit. Of the 33 teams that have enjoyed a 3-1 series lead in Stanley Cup finals history, 32 have been crowned champions. While the odds are in favor of the Capitals emerging as victors, players from both teams are set to win big in state tax dollars.
The NHL and NHLPA have agreed to pay out a playoff bonus pool of $15 million for the 2018 playoffs. While some players may have clauses in their contracts regarding playoff performance bonuses, the NHL pays out a bonus pool depending on playoff results that is split between the teams. To provide a better picture of how the pool is allocated: in the 2013 playoffs, the $13 million pool distributed $2.25 million to the Stanley Cup finalists, and $3.75 million to the Stanley Cup champions. Each player receives an equal share of the pool allocated to their team. In 2013, first round losers received a $250,000 playoff bonus pool per team. With a roster of 25 players, each player received approximately $10,000.
Among the many perks of living in Las Vegas, Marc-André Fleury of the Golden Knights lives in a state with no income tax. This means Fleury will not owe income taxes on his playoff bonus or his $5.75 million annual salary in Nevada. On the other hand, the Capitals’ highest paid player, Alex Ovechkin, who lives in Virginia, will owe income tax on his reported $10 million salary (not to mention plenty more in endorsements), at the top bracket rate of 5.7 percent.
However, with respect to their playoff bonuses, both Ovechkin and Fleury will escape “jock taxes”— income taxes levied by some states on non-resident athletes. These taxes are calculated based on the number of days an athlete spends in a jock tax-administering state where they are under a duty to perform, known as “duty days.” The high earnings and high profiles of professional athletes usually mean easy revenue for states.
Of the 26 states that have major professional sports teams, 21 impose a jock tax. The jurisdictions with major professional teams without a jock tax are Nevada, Florida, Texas, Washington, and the District of Columbia. The four states do not impose a personal income tax. Although D.C. imposes an income tax at the steep rate of 8.95 percent, the U.S. Congress has prohibited the District from taxing non-residents under the Home Rule Act. While the D.C. mayor has made multiple attempts in prior years to include a jock tax in its annual budget, Congress has struck it down each time. This year, with the stage for the Stanley Cup finals set in states without a jock tax—neither Ovechkin, Fleury, nor their teammates will owe jock taxes for their performances. We may be seeing lots of toothless grins as a result.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should your state tax professional athletes through a “jock tax”?
Get a free trial to Bloomberg Tax: State, a comprehensive research service that provides deep analysis and time-saving practice tools to help practitioners make well-informed decisions.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)