Tax Day – Not a Great Day to Be a Professional Athlete

Tax Day has come and gone and for most Americans, they are glad it’s over. If you are one of the many that hates doing your taxes as well as handing over some of your earnings to the federal (and state, if applicable) government, just be glad you’re not a professional athlete.

While guys like LeBron James, Patrick Mahomes, and Juan Soto earn several million dollars each season, they also pay a large portion of their income in taxes. And, if their tax returns aren’t filled out correctly, they can end up paying even more than they should.

Professional athletes also fall victim to the “jock” tax, which are taxes imposed by states and local municipalities. When a professional athlete travels to play a game in Detroit, Michigan, for example, a non-resident athlete must pay a tax for working that day in the state of Michigan and in the city of Detroit.

Some states, like California and New York, can have double-digit tax rates. It’s why athletes like James, who plays for the Lakers, do not officially reside in California. The Golden State has the highest – 13.3 percent – state income tax rate in the United States. James avoids the state income tax because he is officially a resident of Florida.

NOTE: Yes, James still pays some state income tax in other states as well as a local Los Angeles city tax, but he saves millions by being a resident of Florida.

So, which pro athletes pay the most in taxes? 

Effective Tax Rates

There are seven different tax brackets in the U.S. The lowest earners only pay 10% in income taxes. Often, the earners at the bottom of the scale are able to take advantage of different tax deductions and receive a refund instead of having to pay a federal or state income tax.

There are also a number of states – nine – that do not have a state income tax. Florida and Texas are the two most prominent states that do not tax income. Interestingly, a number of professional athletes declare residency in one of those two states. 

At the top end of the tax scale are high income earners. Singles who make $626K or more and joint filers who earn $751,600 or more are all in the top tax bracket of 37%. That means 37 cents of every dollar earned by a professional athlete falling into this tax bracket goes to the federal government. Keep in mind, that does not include state and local income taxes.

Athlete Examples

Let’s take a look at two different MLB examples. Corey Seager signed a contract with the Texas Rangers in December 2021. It was a 10-year deal worth $325 million. In 2023, Seager earned a salary of $35.5 million. 

He paid federal taxes of $13.1 million and another $842K in FICA taxes. These are additional taxes that come out of a worker’s paycheck to fund government-run programs like Social Security and Medicare.

Now, since Seager moved to Texas and declares residency in the state, he paid $0 in state taxes to the Longhorn State. That was not the case for another well-known American League slugger.

Mike Trout signed what was the richest MLB contract at the time, inking a 12-year deal for $426.5 million in 2019. In 2023, Trout earned $37.1 million. He paid $13.6 million in federal taxes and another $879K in FICA taxes. Now, add in Trout’s taxes paid to the state of California – $5,888,404 – and you have to take a minute to realize that Trout, in 2023, paid 52.51 percent of his income in taxes!

Governments Love NBA Players

Everyone knows that LeBron James makes a ton of money. In 2023, his annual salary for playing for the Lakers was $44.5 million. Like all big-time professional athletes, James is in the highest federal tax bracket. That means for 2023 he paid $16.4 million in taxes to the U.S. government.

He paid another $1.1 million in FICA taxes and, since he plays in the state of California, he owed the Golden State government another $5.9 million. James is lucky though because his tax bill could have been even higher if he were actually a resident of California.

The government loves Boston’s Jayson Tatum too. In 2024, the Celtics won an NBA title with Tatum averaging 26.9 points per game and 8.1 rebounds per game. For the calendar year, Tatum did pretty well for himself. He earned $62.8 million.

The only problem with making $62.8 million is you are going to pay about a third of that in income tax to Uncle Sam. Tatum’s federal tax bill? Just $23.2 million! And that didn’t include the Social Security and Medicare taxes that added another $8 million. Tatum, like a number of the highest-paid players in the NBA, pays well over 50 percent of his income in taxes.

Quarterback Tax

Quarterbacks are the highest-paid players in the NFL. Kansas City’s Patrick Mahomes is one of them. Mahomes signed a 10-year, $450 million deal in 2020 with the Kansas City Chiefs. If you are looking for another fascinating subject related to what pro athletes earn, do some research on contracts. Mahomes’ contract is an interesting example.

For the tax year 2024, Mahomes earned $35.8 million. However, only $9.85 million was actual salary. The rest of his earnings came in the form of bonuses and some contract restructuring. Of course, his tax bill was significant.

In 2024, Mahomes paid federal taxes of over $21.5 million when you add the income tax plus the FICA taxes. The Chiefs QB paid an additional $4.9 million in taxes to the state of Missouri. For Mahomes, that meant that nearly 45 percent of his income in 2024 was paid in local, state, and federal taxes.