Tax implication expertise requested

[meefer]

Only because there tends to be a good deal of discussion regarding a player signing with Toronto vs Tampa...or, do we have a an accountant here who is familiar with the tax implications of a player signing with a team in one jurisdiction vs another where the tax implications are substantially different? JT signed for 11 here and I've read that is equivalent to approx. 8.5 in Florida. I'm familiar with dollar difference, trusts, etc., is there an expert out here who can put all this discussion to bed with some expertise?

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[Ropesman]

Tampa bay as well as Nashville and Dallas all have no state tax therefore making a players net income higher then if he were to play in Toronto where the tax implications are close to 50 percent. Im not a tax expert by any means, this is just what i have gathered from articles on the subject. If you subscribe to The Athletic there is a good article on there about this exact subject.

 

[JohnnyInThe6]

ropesman is correct but mind you.. the states he alluded to don't have STATE and LOCAL taxes

they cannot escape federal taxes which are still close to 40% in the highest tax bracket in USA...

compare that to the provincial + federal taxes in Canada (close to 50%).. and by taking a contract in Tampa Bay you would come out approximately 10% ahead

also don't look into the exchange rate... all NHL players are paid in U.S dollars so that's a moot point

 

[ACC1224]

ropesman is correct but mind you.. the states he alluded to don't have STATE and LOCAL taxes

they cannot escape federal taxes which are still close to 40% in the highest tax bracket in USA...

compare that to the provincial + federal taxes in Canada (close to 50%).. and by taking a contract in Tampa Bay you would come out approximately 10% ahead

also don't look into the exchange rate... all NHL players are paid in U.S dollars so that's a moot point

It's an advantage if your expenses are in CDN dollars.

 

[therealkoho]

Most players incorporate themselves and are initially taxed on much smaller amounts then their actual salaries

 

[JohnnyInThe6]

It's an advantage if your expenses are in CDN dollars.

absoloutely. especially when the dollar sinks and you're still being paid in effective USD

But i was referring to total contact value.... NHL player contracts are negotiated in USD and adhered to as such...

 

[Community]

I could be wrong, but I believe that some of the taxes are determined based on where the game is being played? Therefore any descrepencies between teams are half as big as you would initially believe?

 

[Cor]

I could be wrong, but I believe that some of the taxes are determined based on where the game is being played? Therefore any descrepencies between teams are half as big as you would initially believe?

Yup. Athletes claim income based on where the game is played, so only 41 games are claimed under Toronto Income Tax.

However, agents have said before that these athletes can afford the top accountants and there are work arounds where athletes don't pay nearly as much in taxes as you would be led to believe.

 

[Community]

Yup. Athletes claim income based on where the game is played, so only 41 games are claimed under Toronto Income Tax.

However, agents have said before that these athletes can afford the top accountants and there are work arounds where athletes don't pay nearly as much in taxes as you would be led to believe.

Bolded for emphasis... It is very easy to save a lot of your taxes legally (the non-messi way).

 

[Walshy7]

I can’t find info on this. But for example John Tavares gets $900k~ salary and a $10ish m in signing bonus. The signing bonus therefore would only be taxed by Ontario right? And his salary ($900k) would be taxed per state/province?

 

[Menzinger]

There’s a semi- recent article at the Athletic on this issue.

Basically folks over exaggerate the taxation impact on contracts, there are a ton of loopholes for pro sports players to cut down their tax bill, particularly given the fact that 50% of their games are played in different regions than their home

 

[MyBudJT]

But but but... how did Tampa get stammer, Hedman and kucherov on discounts?

 

[kb]

John Tavares Could Save Nearly $12 Million In Taxes On His New Contract

This is only a start. There are other things they can legally do as well. There will be a tax advantage in certain jurisdictions, but there are creative ways within the law to minimize tax implications.

 

[TeamBester]

Any player worried about taxes, can stay far away.

 

[lifelonghockeyfan]

In Canada, more important that where you earn you money is you primary residence. Why never hear of any problems that Blue Jays or Raptors have with signing players (largely Americans) because they are out of Canada for more than 183 games a year. I think websites do a disservice to the fans because the ill informed fans just look at personal tax rates per jurisdiction which is kinda meaningless.
Also athletes/entertainers/doctors/lawyers and really anyone can shelter their income with a corporation. The only pay income on money they take out of their corporation. Especially high priced players can leave a lot of their money in their corporation and not pay taxes till it withdrawn.
Plus all the side income a player earns. I know one former NHL,,,12 vet, top pay 4m, who says he never spent one cent of his NHL salary. Despite having a two homes, married, three kids....he had enough residue income to live....rather good but by his income standards...modestly.

 

[PuckMagi]

It's an advantage if your expenses are in CDN dollars.

Living expenses are probably higher in Toronto compared to Florida even when you factor in the currency exchange... so this is not an advantage whatsoever to signing in Toronto compared to Tampa.

 

[WillNy29]

The tax implications are pretty complicated. As a CPA I can tell you for sure it isn't as easy as it looks.

We have to remember that Tavares has a residence in Canada so he would be getting taxed in Canada regardless of where he pays. I posted a write up about this in the tax thread on the main board. Their is a tax treaty that has essentially allowed athletes and entertainers to minimize tax as much as possible. The differences are miniscule.

 

[WillNy29]

In Canada, more important that where you earn you money is you primary residence. Why never hear of any problems that Blue Jays or Raptors have with signing players (largely Americans) because they are out of Canada for more than 183 games a year. I think websites do a disservice to the fans because the ill informed fans just look at personal tax rates per jurisdiction which is kinda meaningless.
Also athletes/entertainers/doctors/lawyers and really anyone can shelter their income with a corporation. The only pay income on money they take out of their corporation. Especially high priced players can leave a lot of their money in their corporation and not pay taxes till it withdrawn.
Plus all the side income a player earns. I know one former NHL,,,12 vet, top pay 4m, who says he never spent one cent of his NHL salary. Despite having a two homes, married, three kids....he had enough residue income to live....rather good but by his income standards...modestly.

To add to this they can pay themselves in dividends from the corporation which allows for near perfect integration of the tax system.

Paying yourself with a dividend from cash built up in your holding corp allows you to defer tax and also allows you to claim a dividend tax credit

 

[TOGuy14]

Athlete taxation is very complicated.

In a lot of instances you will pay taxes on a prorated portion of games you play in different jurisdictions. In addition to this some locales also have a special "jock tax" What is the "jock tax"?

 

[Eat The Rich]

I knew it wasn't as simple as it's made to sound.

There's a lot of naivety involved with anyone who thinks an athlete's decision is based on tax rates.

These guys are multi millionaires.. you know by default they aren't paying taxes the same way we are.

 

[Field of Dreams]

It's an advantage if your expenses are in CDN dollars.

A fleeting one, currencies are volatile, tax legislation is not.

While real estate taxes are higher in Florida, it's mainly a snow bird tax that's offset by the low income taxes paid by locals. Take a look at the mansions you can buy in the states at the same (currency adjusted) price for a regular detached home in Toronto. Look at the prices of regular everyday items. It's much cheaper to live in places like Florida/Tenessee. I know from experience, I lived in the Tampa area for a couple years.

 

[meefer]

Thanks for the input, folks.

 

[klamla]

i got a C- in income tax

 

[klamla]

really wanted to share that i did it twice. whoa posting is different

 

[WillNy29]

i got a C- in income tax

worst course of all time