How Easy is it for Wealthy MLBers to Avoid State Income Tax?

How Easy is it for Wealthy MLBers to Avoid State Income Tax?
By Alan Olsen

Spring is here and that means a lot of things to a lot of people. For many, spring means baseball is back, from Little League to the Majors, ball players are back on the diamond hitting homers, striking people out and stealing bases. For Major Leaguers, it also means another year of hefty incomes. That’s because Major League Baseball players are among some of the wealthiest athletes in the world, thanks to huge contracts that come with mostly guaranteed money. Baseball is also a game of numbers and statistics. Fans and players alike follow players’ statics closely. However, while many players claim they don’t worry about their numbers as long as their team wins, there is one number almost all of them pay attention to: their bottom line.

Sunny Weather Tax Havens

In other words, baseball players are no different than people from any other profession; they care about their paycheck and how much of that paycheck is going to the IRS. The good news for baseball players is that protecting their income from state taxes is easier in their sport than it is in any other professional league. First off, players begin their fiscal year in Spring Training, which takes place in either Arizona or Florida. Arizona doesn’t start charging players on their income until the regular season starts and Florida never does because there is no state income tax in Florida. Any player who lives in a tax-free state will automatically protect 20 percent of his income from taxes.

Spring Training Is Over

So now that Spring Training is over and the numbers actually count on the field and in the win and loss columns, where does that leave the tax numbers? The regular season also makes it easier for MLBers to protect their income from taxes, because they can claim residency in tax-free states easier than athletes in any other professional sports. The reason for this is that in order for a state to claim someone as a resident that person has to reside there for at least 183 days throughout the year. With their 162-game schedule, including many road trips to states all over the country, it is very easy for a Major League Baseball player to avoid being claimed by most states.

It’s About Where You Live

Perhaps one of the best examples of this is the highest paid player in the game, Clayton Kershaw, who pitches for the Los Angeles Dodgers, but claims residency in Texas. Of course, Kershaw will be responsible for all the money he earns when his team plays in California. However, because he lives in Texas, Kershaw will actually be able to avoid paying state taxes on many of his workdays, including all of Spring Training, off days and games that are played in tax free states, like Texas. With his salary at roughly $30 million a year, that’s a savings of almost $3 million annually because he lives in Texas instead of California.

Swing For The Fences

So baseball is back and for those who love numbers baseball is a dream come true. Meanwhile, for those players who like to see bigger numbers in their bank accounts and smaller numbers on their tax bill, the news is also good, as long as they claim residency in a state with no income tax. They can swing for the fences far, far away just as long as their money is protected in a state with no taxes no matter where they play away.