How Much Do NBA Players Pay in Taxes?

NBA players pay taxes on their income just like the rest of us. Here’s a look at how much they pay in taxes and how it affects their take-home pay.

How NBA Players are Taxed

All NBA players have to pay taxes on their income. However, the amount of taxes they have to pay depends on the state they play in. For example, players who play in California have to pay a higher percentage of their income in taxes than players who play in Texas. Players who play in states with no income tax, like Florida, don’t have to pay any taxes on their NBA income.

Federal Income Taxes

The marginal income tax rate for NBA players is 37%. That means that if a player earns an extra $1,000, they would owe the government $370 in taxes. The effective tax rate, which takes into account deductions and credits, is slightly lower.

In addition to federal income taxes, NBA players also have to pay state income taxes. The highest state tax rate is 13.3% in California, which is where many players reside during the season. Other states with high tax rates include New York (8.82%), Oklahoma (5%), and Texas (0%).

Players also have to pay federal payroll taxes, which consist of Social Security and Medicare taxes. The Social Security tax rate is 6.2% on the first $132,900 of income, while the Medicare tax rate is 1.45% on all income.

Finally, NBA players are also subject to a luxury tax if their team’s salary exceeds a certain amount set by the league each year. For the 2019-20 season, that amount was $132 million. The luxury tax is paid by the team, not the player, but it’s still something that affects their overall take-home pay.

State Income Taxes

Players who are traded mid-season may be subject to “true-up” taxes in their former and new states. For example, if a player is traded from the Lakers in California (13.3% state tax) to the Knicks in New York (8.82% state tax), he would owe taxes to both states based on the number of days he played in each state.

Players may deduct reasonable expenses related to playing basketball, such as union dues, agent fees, and equipment. They can also deduct 50% of meal expenses while on the road. However, they cannot deduct the cost of travel to and from games; that’s considered personal travel.

Local Income Taxes

Players are subject to certain taxes in each state in which they play games. The tax burden could be especially high for players who move around a lot during their careers. For instance, a player who is traded from a team in Florida to a team in California would go from living in a state with no income tax to living in a state with the highest income tax rate in the nation.

The good news for NBA players is that they can deduct their local income taxes from their federal taxes. So, if a player pays $100,000 in state taxes, he can deduct that amount from his federal taxes owed.

How Much NBA Players Pay in Taxes

It is widely known that NBA players make a lot of money, but what is often unknown is how much they pay in taxes. Depending on the state they play in, federal taxes, and other factors, the amount of taxes an NBA player pays can vary greatly. In this article, we will take a look at how much NBA players pay in taxes and some of the factors that affect their tax bill.

Federal Income Taxes

The United States has a progressive tax system, which means that high-income earners pay a higher marginal tax rate than low- and middle-income earners. The marginal tax rate is the rate you pay on your last dollar of income. For example, if you earn $50,000 per year and are in the 22% marginal tax bracket, you’ll pay $11,000 in federal income taxes ($50,000 x 0.22).

Players in the NBA are subject to the same progressive tax rates as everyone else in the United States. However, due to the league’s structure, they also pay taxes in multiple states. In addition to federal income taxes, NBA players also pay state income taxes, Social Security taxes, and Medicare taxes.

Let’s take a look at an example to see how much an NBA player might expect to pay in taxes. We’ll use LeBron James as our example player. LeBron is from Akron, Ohio and played for the Cleveland Cavaliers for most of his career before moving to the Los Angeles Lakers in 2018. He earned $23 million during the 2017-18 season and is in the 37% marginal tax bracket.

Assuming LeBron is filing his taxes as a single individual (he is married but we’ll keep it simple for this example), he would owe $5.41 million in federal income taxes ($23 million x 0.37). LeBron would also owe state income taxes to both Ohio and California. The state of Ohio has a flat income tax rate of 5%, so LeBron would owe $1.15 million in state income taxes to Ohio ($23 million x 0.05). California has a marginal tax rate of 13%, so LeBron would owe $2.99 million in state income taxes to California ($23 million x 0.13). In total, LeBron would owe $9.55 million in federal, state, and local income taxes on his $23 million salary.

Social Security and Medicare Taxes: In addition to federal and state income taxes, NBA players also have to pay Social Security and Medicare taxes. Social Security tax is imposed on the first $127,200 of wages at a rate of 6.2%. Medicare tax is imposed on all wages at a rate of 1.45%. For our examples purposes we will assume that LeBron James only earned $23 million during the 2017-18 season (the actual amount is likely higher due to endorsements and other forms of compensation). Based on that assumption, LeBron would owe $1.4 million in Social Security taxes ($23 million x 0.062) and $332,500 in Medicare taxes ($23 million x 0 .0145).

In total

State Income Taxes

While the federal government imposes a uniform tax rate on all Americans, individual states are free to set their own rates. This can have a significant impact on a player’s take-home pay, as states with high taxes will deduct a larger portion of their salary than those with lower taxes. To make things even more complicated, some states have cities with their own income tax rates, which are in addition to the state rate. For example, California’s state income tax rate is 13.3%, but players who play for the Los Angeles Lakers also have to pay an additional 4% in city taxes, for a total of 17.3%.

Players who are traded mid-season may also find themselves suddenly subject to different state tax rates. For example, when Kyrie Irving was traded from the Cleveland Cavaliers to the Boston Celtics in 2017, his tax bill increased by nearly $1 million because Massachusetts has a higher state income tax rate than Ohio.

Local Income Taxes

Local income taxes can be quite high for NBA players. In California, the state with the highest income tax rate, NBA players pay 13.3% of their salary in state taxes. In Texas, which has no state income tax, players pay only 1.5% in city and county taxes. The following table shows the total state and local income tax rates for selected NBA cities.

How NBA Players Can Reduce Their Taxes

There are a few ways that NBA players can reduce the amount of taxes that they pay. One way is to live in a state with no income tax. Another way is to take advantage of the NBA’s CBA, which allows players to deduct up to $5 million in expenses.

Federal Income Taxes

Professional athletes, including NBA players, are subject to the same federal income tax laws as everyone else. The amount of tax you owe depends on your income, filing status, and number of dependents.

For 2019, the IRS has set the following tax brackets:
10% on taxable income from $0 to $9,700 for single filers
12% on taxable income from $9,701 to $39,475 for single filers
22% on taxable income from $39,476 to $84,200 for single filers
24% on taxable income from $84,201 to $160,725 for single filers
32% on taxable income from $160,726 to $204,100 for single filers
35% on taxable income over $204,100 for single filers

37% on taxable income from $0 to $19,400 for married couples filing jointly
39% on taxable income from $19401 to $78950 Married couples filing jointly
48% on taxable income from$78951 to $168400 Married couples filing jointly
52% on taxable income from$168401 to$321450 Married couples filing jointly
57% on taxable income over$321451for married couples filing jointly

State Income Taxes

Among the various types of taxes that athletes must pay, state income taxes can have the biggest impact on their take-home pay. In fact, some athletes end up paying more in state taxes than they do in federal taxes.

For example, California has a top marginal tax rate of 13.3%, which is the highest in the country. So, if an NBA player who lives in California has an annual salary of $10 million, he would owe approximately $1.33 million in state taxes.

Players who are taxed at this high marginal rate can end up paying more than 50% of their salary in taxes when you include federal, state, and local taxes. This is one of the main reasons why many professional athletes choose to live in states with no income tax, such as Florida and Texas.

Local Income Taxes

When it comes to state taxes, professional athletes have it good. They only have to pay taxes on the games played in the state where they physically play. So, for example, if a player is traded from the Los Angeles Lakers to the New York Knicks during the season, he would only be taxed on the games he played while he was a member of the Lakers.

However, things change when it comes to local income taxes. Players are subject to local income taxes in every city they play in, whether it’s for one game or an entire season. So if a player is traded mid-season from the Lakers to the Knicks, he would be subject to local income taxes in both Los Angeles and New York City.

The effective tax rate for NBA players can vary widely depending on their location. For example, California has a top marginal tax rate of 13.3%, while New York’s is 8.82%. So a player who makes $10 million per year would pay $1.33 million in California state taxes, but only $882,000 in New York state taxes.

Players also have to pay federal income taxes, which are currently at a marginal rate of 37%. So a player who makes $10 million per year would pay $3.7 million in federal taxes.

In total, an NBA player who makes $10 million per year and is traded from the Lakers to the Knicks mid-season would owe approximately $5.8 million in taxes – that’s an effective tax rate of 58%.