In the world of professional sports, success is often measured in victories. But when it comes to income taxes for pro athletes, there’s one opponent none can overcome: the “jock tax.” 

Despite its cringe-worthy name, this doesn't just apply to athletes. The risk of owing income tax in multiple places arises for anyone who works in more than one tax jurisdiction. Within the realm of sports, the same taxation may apply to team doctors, trainers, coaches and scouts - all may have to pay tax to any state where they have earned income.

Financial planning is no place for a hail mary pass. Play it safe, keep track of your information, know your tax liability, and read on to better understand the Jock Tax. You’ll quickly learn that the key to a W when reporting income earned in different jurisdictions is meticulous tracking of where you have spent time.

Understanding the Jock Tax

First, a primer for pro athletes and other sports professionals: the jock tax may require you to pay income tax to any state outside your home state/city where you have generated earnings. Think of every place you’ve been for an away game or competition. This includes during the regular season, as well as playoffs and championships. It can also include speaking engagements, press junkets, and fan meetings. If it was an earning opp, and it wasn’t in your home tax jurisdiction, you may owe. But the question is, how much, and how is it calculated? 

Commonly, the clock starts ticking using the “Duty Day” model. A duty day is when an athlete or sports professional is on duty - or working - in their professional capacity. It might be playing a game, or it might be treating a blown-out knee. Either way, it counts. For ease, the duty day calendar in many states begins the first day an athlete or sports professional attends preseason training, according to their contract. It ends on the final day of their season. Many states impose jock tax as follows: 

Percentage of Duty Days the athlete spent in the state x Athlete’s salary (not including endorsements)

The actual amount of tax owed will depend on each state’s income tax rate. (As always, consult a tax professional for your specific circumstances.) 

The Challenge for Athletes/Sports Professionals

For professional athletes and other sports professionals, keeping track of earnings and the corresponding tax liabilities can be a logistical nightmare. Each state and country has its own tax rates and rules, making it essential for athletes to maintain detailed records of their activities in various locations. Failure to accurately report income earned in each jurisdiction can result in costly penalties and audits.

The jock tax is not unique to athletes; many individuals face similar challenges when living and working across multiple jurisdictions. However, for professional athletes, the impact is more pronounced due to the nature of their careers, which often involve extensive travel and competition across various locations. 

A challenge, of course, is keeping track of where you’ve been and why. 

Affected Sports 

The impact of this tax can vary depending on the nature of the sport, the frequency of competition and the locations the athlete competes in. Generally, team sports with frequent travel and games held in various jurisdictions tend to be more affected. Here are a few sports that are commonly considered to be more affected:

• Basketball: The NBA (National Basketball Association) has a grueling schedule with teams traveling across the United States for regular-season games, playoffs, and potentially international events. Given the frequent movement and the high number of games, basketball players often find themselves subject to tax in multiple states and possibly countries.
• Hockey: Like basketball, professional hockey leagues such as the NHL (National Hockey League) involve significant travel, with teams crisscrossing North America and occasionally traveling internationally. This results in players facing potential tax obligations in various jurisdictions.
• Football / Soccer: 

• Domestic Leagues: In countries like the United States, where soccer leagues operate, players may be subject to state taxes based on the locations of both home and away games. Income tax can come into play when players earn income in states other than their team's home state. Intra-country taxation issues are less of an issue outside of the United States where state or provincial taxes are less common. . 
• International Competitions: Football is a global sport, and players often participate in international competitions such as continental tournaments, qualifiers, and friendly matches. In such cases, players may become subject to the tax laws of the countries where these events take place.
• Club Transfers: Transfers between clubs, especially those involving cross-border moves, can introduce additional tax considerations. Players changing clubs or moving to a team in a different country may need to navigate the tax implications of their new location.
• Exhibition Matches: Friendlies, preseason tournaments, and other exhibition matches held in various locations can contribute to the complexity of a soccer player's tax situation. These events might require players to report income in the jurisdictions where the matches occur. 

• Baseball: While MLB (Major League Baseball) has an extensive schedule, the impact of taxes on baseball players is at least somewhat mitigated by the fact that they play a substantial number of games in their home city. However, players are still subject to the tax when they travel for away games and, particularly, during the postseason.
• Golf and Tennis: Individual sports like golf and tennis also face challenges with the jock tax, especially for athletes who participate in tournaments held in different locations. Both sports involve frequent travel, and athletes can accumulate tax liabilities based on the locations of these events.
• Football (American): Although the NFL (National Football League) has a shorter regular season and less frequent games when compared to other major professional sports leagues, football players can still be affected by the jock tax due to away games and potential playoff matches. However, the impact may be less compared to sports with longer seasons.
• Other Sports:  In addition to these ‘major’ sports, it's essential to note that the jock tax can affect athletes in any sport if they participate in events held in multiple jurisdictions. Athletes competing in international events or tournaments may also face additional complexities related to tax obligations in different countries.

The Importance of Documentation

Experts commonly cite the significance of documentation in managing complicated tax issues.  In the world of taxation, documentation is your best defense. Athletes should strive to maintain detailed records of their travel, practice sessions, and games in each location. This includes tracking the number of days spent in different jurisdictions and related expenses.

This not only helps athletes avoid legal issues but also enables them to take advantage of potential tax credits and deductions, which can include training costs, equipment purchases, and some travel expenses. As with all expenses, however, they need to provide detailed and accurate records.

The Toll on Athletes

The jock tax can take a significant financial and logistical toll on professional athletes. With each state or country potentially asking for portion of their income, athletes may find themselves facing a substantial reduction in their earnings unless reciprocity agreements are in place. This can be particularly challenging for athletes with shorter careers or those who earn lower salaries, impacting their overall financial well-being.

Furthermore, it adds a layer of uncertainty to contract negotiations and career decisions. Athletes must carefully consider the tax implications of signing with a team in a particular jurisdiction, taking into account not only the team's performance but also the financial implications of playing in that location.

In conclusion, the jock tax is a complex and challenging aspect of professional athletes' financial lives. Athletes must approach this issue strategically, working closely with financial professionals to develop comprehensive plans that account for the tax implications of their careers. The advice from accountants reinforces the importance of meticulous record-keeping in successfully managing the jock tax. As the sports world continues to evolve, so too must the financial strategies employed by athletes to ensure they score big both on and off the field.

How to Keep Track Of Days Spent Where: Chrono

Chrono: Time in Place was developed with these use cases in mind.  

Navigating the intricate web of taxes related to the jock tax demands a meticulous approach to documenting your time and whereabouts. This is where Chrono emerges as a valuable companion in your professional journey.

Developed with a keen understanding of the challenges individuals face in tracking their movements, Chrono effortlessly captures your time in place. By seamlessly recording your locations and durations, Chrono becomes a reliable ally when it comes to producing detailed and accurate records. 

Whether you're a seasoned athlete constantly on the move or a sports industry professional with a hectic schedule, Chrono ensures that you can effortlessly access a comprehensive log of your activities. This wealth of information not only simplifies your personal record-keeping but also becomes an invaluable asset when dealing with tax-related matters.