Professional Athletes Could Be Getting a Big Tax Victory in Cleveland

Professional Athletes Could Be Getting a Big Tax Victory in Cleveland

Millions of sports fans all over the country love their favorite teams and athletes. A large majority of professional athletes from all walks of the sporting world make a lot of money and are some of the highest paid individuals in the country. While some fans take exception to how much money professional athletes make, most fans don’t care as long as they are helping their favorite team win. However, regardless of whether or not you think athletes make too much money, the fact is, professional sports stars also pay a lot of money in taxes. In fact, many of them, depending on where they live and what sport they play; pay a significant portion of their income to the taxman.

Cleveland Jock-Tax Is Unfair

Besides all the normal taxes that everyday citizens pay professional athletes pay the so-called “jock tax.” The dreaded jock tax is like a double whammy for many athletes, because they end up paying taxes twice on the same income, depending on what city they were physically located in when they earned the money. Over the past couple of years, however, some athletes have started to fight back, especially against the city of Cleveland, Ohio. So what makes Cleveland different from any other city in the United States? Many states charge athletes a jock tax, but Cleveland charged a city tax on athletes who play their sport within city limits, as well. However, that is all going to change now that the Ohio State Supreme Court has ruled that Cleveland’s tax on athletes is unconstitutional.

Good News for Athletes

So what does the change mean for athletes that play their sport in Cleveland? First, it means that the city’s jock tax formula has changed and going forward athletes will pay a lot less to the Cleveland when they play in the city. That’s because they will now be charged on the number of days they work and not on the number of games they play. It also means that any athlete, no matter the sport, will be able to file for a refund from the city for a portion of the taxes it paid to the city during the last three years. According to one estimate, the city could end up paying as much as $2.4 million in refunds to players from all professional sports. Meanwhile, the city’s tax department said that going forward it could lose as much as $1 million every year due to the new formula that will now be used.

Victory Is Ours

It is not clear how many athletes will come forward and seek a refund. For many of the lower-paid athletes the refund would only amount to a few hundred dollars, which means some will likely just skip the hassle. However, for some of the top earning athletes, such as those in the NFL that make more than $1 dollars in a single game the extra money could be worth fighting for, especially if they made multiple visits to Cleveland over that last three years. In any case, the ruling by the court does mark a victory for professional athletes everywhere against the dreaded jock tax.

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Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

Alan L. Olsen, CPA, Wikipedia Bio

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