I have a number of clients who are current or former Major League Baseball players, coaches and managers. Even people who are not big sports fans find sports more interesting than the Income Tax Laws. There are some rare occasions where Income Tax Laws become interesting because of the interplay with professional athletes.


Sore Losers in California and Michael Jordan’s Revenge:

Professional athletes (and coaches/managers) are subject to Income Tax in the states in which they appear for work. While some states do not have an Income Tax on individuals (e.g. Florida and Texas) most do. If this were not bad enough, many municipalities also have an Income Tax and filing requirements. Accordingly, a Chicago White Sox player must file a Return and pay tax in a dozen or so states as well as a number of municipalities (e.g. Detroit and New York City). This is often referred to as the “Jock Tax”.

Perhaps you can blame it all on the sore losers in California. Soon after the Chicago Bulls beat the Lakers in the 1991 NBA Finals the California’s taxing authority went after Bulls players (including Michael Jordan). They claimed that since the Bulls players performed services in their state, and earned money as a result, that a portion of their salary should be subject to California Income Tax. Not long after that, the Illinois Department of Revenue went after athletes from California who played in Illinois in what was dubbed “Michael Jordan’s Revenge”.

At this point, all states that have an Individual Income Tax demand a piece of the pie. Some states even have special taxing units devoted solely to “auditing” professional athletes.


Allocating Income Between States:

Not all states have the same approach to taxing athletes. However, many states tax professional athletes based upon a “Duty Days” system. Briefly, Duty Days includes all of the days that a player is deemed to work for the team. It normally begins counting with the official pre-season training and goes through the last game in which the team competes. A player that goes to the World Series would have more duty days than if their team had not made the playoffs. There are special rules for travel days, exhibitions, etc. The taxing state then determines how many of the Duty Days physically took place in their state. The number of Duty Days in their state is divided into the total Duty Days for the year and multiplied by the player’s salary. For the most part, it is irrelevant as to whether the athlete actually played. That is, the Duty Days in a state is not affected by whether the player sat on the bench or played the entire game.

So, for example, if Paul Konerko is an Illinois resident who has 181 Duty Days in 2012, and plays 9 games in California, then roughly 5% of his salary (9/181=5%) would be taxed by California. If Konerko’s 2012 salary is $12 million then roughly $600,000 of Konerko’s 2012 salary would be subject to California State Income Tax.

Most employees get a single Form W-2 from their employer. However, Major League Baseball players may get 10 to 15 Form W-2’s from their team. The separate Form W-2’s seek to allocate a portion of the player’s compensation between various states and municipalities. Unfortunately, the Form W-2’s don’t always properly match up. In some cases the sum of the income allocated to the states results in more than 100% of a player’s compensation.



Professional athletes often have a principal residence in one location and one or more temporary homes. Some of the players, coaches and managers of the Chicago Cubs have a home in the Chicago area and live there during the regular baseball season.

However, the Chicago Cubs hold their spring training in Hohokam Stadium in Mesa Arizona, just outside of Phoenix. For spring training, these same people live in the Phoenix area (either own or rent). Some play “fall ball” or “winter ball” in yet other locations. This generally results in additional qualified unreimbursed employee business expenses.

A variety of costs result from playing Major League Baseball. Some are obvious such and could apply to any employee who travels for work. Others are unique to the MLB. For example, there is something called “Clubhouse Dues”. Clubhouse Dues are akin tips paid by players, coaches and managers to the person who runs the clubhouse at each ball park. No one is legally required to pay clubhouse dues to any particular clubhouse manager. However, it is “protocol” that this be done; not unlike paying a tip to waiter at a restaurant. The amount of clubhouse dues paid by a player is generally in relation to their compensation. Wealthier players are expected, but not required, to pay more in clubhouse dues.

Some costs are paid directly by the team. In some situations, teams will not pay the cost but will reimburse the players for a portion of the costs. In yet other situations, the players are completely on their own for the costs.

Most taxpayers find it challenging enough to figure out what their expenses are.

Consider the plight of the professional athlete that must not only keep track of their expenses, but which costs were incurred in a particular state.



There are special tax considerations for professional athletes. Most result from the fact that they live and work in multiple states and municipalities. This requires significantly more record-keeping and preparation of numerous Income Tax Returns. Of course, all of this dramatically increases the likelihood of a challenge or audit by a governmental body, even if their Returns are complete and accurate.




Copyright ©, Keith B. Baker – 2012

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