To the average person reading breaking news on a certain NBA player’s contract, it may seem like they earn astronomical figures. It seems especially true when considering different endorsement deals these players have off the court and the often very lavish and luxurious lifestyles they live.
However, take away the endorsement deals and sponsorships and start considering the taxes these players have to pay on top of the agent fees to negotiate and secure multi-million dollar deals in the first place, and you’re left wondering how much an NBA player actually makes after everything.
NBA players, just like the rest of us law-abiding citizens, have an obligation to pay taxes to the government. The first item on this list of fees is the federal income tax. The federal income tax has a rate of 37 percent in the USA and 33 percent in Canada for NBA players.
The next fee that players have to deal with is the state income tax. The state income tax all depends on where a player is playing. According to Tanza Loudenback of Business Insider, California’s state tax rates are the highest at 13.3%, while Pennsylvania’s state tax rates are the lowest at 3.07% among states that host NBA franchises. On the bright side, Ryan Prete of Bloomberg Tax states that if a player finds himself playing for a team either located in Florida, Tennessee, or Texas, he will not have to pay any state income taxes.
The last fee that every player has to deal with is the jock tax. This is a form of income tax enforced on players who are visiting a state where they will be earning money as part of their employment. States that do not issue state income taxes also do not solicit the jock tax. According to John Karaffa, President of ProSport CPA, an accounting firm that offers tax and financial services specifically to athletes, an NBA player typically visits around 20 different states throughout the course of an NBA season.
Jock taxes vary depending on the schedule of a team and the number of times they visit a state in a season. The Marquette Sports Law Review says the jock tax is determined by calculating income earned from duty days or the total number of days a player is involved with the team in another state as a percentage of the total number of days in a season.
Do note that even if a player plays for a team in a state that does not administer the state income tax, he will still have to pay jock taxes when he travels to different states for practices and games.
Aside from taxes, agent fees can be assumed to be at around 3 percent of the player’s playing contract. They are not permitted to make more than 4 percent.
Although there are clear outliers given the league’s bona fide superstars get paid exponentially more than players at the bottom of their team’s pecking order and payroll, Basketball-Reference reports that the average player salary for the 2019-2020 NBA Season is around $6.9 million, while the median salary is around $2.9 million.
With all this information, we can take the average salary of $6.9 million and subtract approximately $2.5 million from it due to the federal income tax assuming the player does not play for the Toronto Raptors. Next, by calculating the average state income tax of all states with NBA teams in them, an average of 5.46% or $376,740 of said salary will be deducted. Jock taxes can be averaged out to around 3 percent or $207,000 based on Bloomberg Tax’s calculations of jock taxes imposed on some NBA players. Agent fees, at an assumed 3 percent, will amount to $207,000.
Overall, with this very rough estimate that still really depends on where a player resides and plays, the initial $6.9 million comes down to around $3.61 million, where almost half of the initial salary is eaten up by taxes and fees.
Ultimately, NBA players still have pretty high salaries in general. Rather than saying they don’t earn a lot, oftentimes people just forget to consider how much gets shaved off of this figure before the player actually gets to receive it and reap its benefits.