Brian Burke breaks down the tax benefits to American NHL teams competing for free agents
- Thread starter Fenway
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Bondurant
Registered User
There was some discussion of this in today's episode of Spittin Chiclets. RA or Biz was contacted by an agent that believed the benefits were overstated because there are crafty things you can do with your money in Canada that levels the financial playing field.
mouser
Business of Hockey
Will watch later, but I’m curious if Burke discusses Canadian Retirement Compensation Agreements (RCA)? Using a RCA in Canada is a massive tax sheltering strategy with no comparable options for players on USA teams.
https://ca.rbcwealthmanagement.com/documents/17271/17295/Reitrement+Compensation+Arrangements+(RCAs) for+NHL.pdf/2588c228-c37c-4cfa-8307-4c39321769b9
Although the tax liability without the RCA may be very high, the tax liability with the RCA is lower than if the player were resident in most states playing for a US team. The annual combined US federal, California, Social Security and Medicare tax liability for a player resident in California with compensation of US$6 million would be approximately US$2,947,000. This liability is significantly higher than if the player was a resident in any of the Canadian provinces as illustrated in example 2. Even if the player is a resident of Florida or Texas, the tax liability would be approximately US$2,620,000. This liability is greater than that of all of the provinces with an NHL team.
https://ca.rbcwealthmanagement.com/documents/17271/17295/Reitrement+Compensation+Arrangements+(RCAs) for+NHL.pdf/2588c228-c37c-4cfa-8307-4c39321769b9
Although the tax liability without the RCA may be very high, the tax liability with the RCA is lower than if the player were resident in most states playing for a US team. The annual combined US federal, California, Social Security and Medicare tax liability for a player resident in California with compensation of US$6 million would be approximately US$2,947,000. This liability is significantly higher than if the player was a resident in any of the Canadian provinces as illustrated in example 2. Even if the player is a resident of Florida or Texas, the tax liability would be approximately US$2,620,000. This liability is greater than that of all of the provinces with an NHL team.
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mouser
Business of Hockey
Watched it now. No surprise that there wasn't a mention of RCA. Another good article:
How pro athletes and other high earners stick-handle high Canadian income taxes
Sports agents have long bemoaned the tax rates that high-salaried Canadian-based athletes face. For example, Ontario’s top individual tax rate is 53.3 per cent, the highest among all NHL locales. But wealthy people have tools that can tamp down the effects of those tax rates.
Financial advisers recommend their high-income clients, such as professional athletes, use a vehicle called a Retirement Compensation Arrangement (RCA) to help offset high income taxes. In basic terms, an RCA allows an individual to sock away up to half of their salary each year and delay accessing it until retirement, when the individual may well be living somewhere else and paying a far lower tax rate.
“They make tremendous sense,” says Trevor Parry, a national tax estate-planning specialist for Raymond James Ltd. in Toronto. “Every player on the team should have one.”
Mr. Parry has put RCAs to work for numerous pro hockey players among the Leafs and Montreal Canadiens.
He has also tried to put them in place for Toronto Raptors basketball players, but the National Basketball Association’s collective bargaining agreement bans the practice. The NBA felt the implementation of RCAs gave the Raptors, the sole franchise outside the United States, “an unfair advantage,” according to Mr. Parry.
How pro athletes and other high earners stick-handle high Canadian income taxes
Sports agents have long bemoaned the tax rates that high-salaried Canadian-based athletes face. For example, Ontario’s top individual tax rate is 53.3 per cent, the highest among all NHL locales. But wealthy people have tools that can tamp down the effects of those tax rates.
Financial advisers recommend their high-income clients, such as professional athletes, use a vehicle called a Retirement Compensation Arrangement (RCA) to help offset high income taxes. In basic terms, an RCA allows an individual to sock away up to half of their salary each year and delay accessing it until retirement, when the individual may well be living somewhere else and paying a far lower tax rate.
“They make tremendous sense,” says Trevor Parry, a national tax estate-planning specialist for Raymond James Ltd. in Toronto. “Every player on the team should have one.”
Mr. Parry has put RCAs to work for numerous pro hockey players among the Leafs and Montreal Canadiens.
He has also tried to put them in place for Toronto Raptors basketball players, but the National Basketball Association’s collective bargaining agreement bans the practice. The NBA felt the implementation of RCAs gave the Raptors, the sole franchise outside the United States, “an unfair advantage,” according to Mr. Parry.
@mouser
I think the bigger advantage is the weather especially to players who are starting a family.
Southern US cities are appealing to married players.
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