GAME-CHANGING TAX MATTERS FOR ATHLETES By Brad Pauley, CPA | Director - Tax
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here were many deductions professional athletes were able to take under the old tax law, however, under the new law, deductions taken in previous years are no longer available. Some examples of expenses that are no longer deductible include contract negotiation (agent) fees, union dues, club house manager dues and tips, equipment, duplicate living expenses, travel, rideshare fees and taxis, vehicle shipping, training, rehabilitation, car rentals, etc. These expenses are no longer deductible for federal purposes because the new tax act did away with all of the 2% miscellaneous itemized deductions, which include unreimbursed employee business expenses.1 This significant change has severely impacted the taxes of professional athletes. Under the old law, expenses could be bundled in one year (especially agent fees), thereby reducing the impact of the 2% adjusted gross income “haircut” given to these types of expenses. As long as the taxpayer didn’t fall into Alternative Minimum Tax (AMT), writing off 2 years of agent fees in one year was an extremely lucrative tax benefit, especially to athletes with long-term deals. Some states, such as California, still afford these types of deductions, but the tax benefit still doesn’t compare to that of previous years.
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KROST QUARTERLY VOL. 2 ISSUE 4 - THE SPORTS & ENTERTAINMENT ISSUE