MLB Spring Training Helps Players Pay Less Taxes

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While baseball purist fans rejoice in spring training opening up, so do the players not just for the game but also their paychecks. Spring training camps are located in Arizona and Florida which helps players pay less since they are legally working in those states. This helps cushion the tax blow they receive from the states they play in during the regular season.

Sean Packard, CPA, who is Director of Tax at OFS. He specializes in tax planning and the preparation of tax returns for pro athletes shared this tax benefit with Forbes.com:

Spring training is an opportunity for players to escape state income taxes on roughly 20% of their income. Professional athletes pay taxes in all states in which they play. This is known as the “jock tax.” Most states calculate a player’s jock tax based on the number of duty days spent inside the state divided by the total days a player works.

Unlike most sports, where preseason training occurs near the team’s home, spring training takes place in one of two states, Florida or Arizona. Florida does not have an income tax and while Arizona does, it does not begin taxing professional athletes until the beginning of their teams’ regular season. This means that duty days spent in the state prior to the season do not count as taxable days. Holding spring training in these two tax havens can save elite players hundreds of thousands of dollars in state income taxes.

Packard provides an example of how money a player can save just at spring training.

The portion of Santana’s salary allocable to spring training under the duty day calculation is $5.355 million. If the Mets held spring training in New York instead of Florida, this income would be allocated to New York and subject to their 8.82% income tax. But because the Florida (and Arizona) climate is more conducive to baseball in February, Santana will save $472,000 in state income taxes.

MLB Player Change Teams Because of Taxes?

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Pablo Sandoval few days ago signed with the Boston Red Sox in a free agent deal for five years and worth $100 Million. Kurt Badenhausen of Forbes wrote why Pablo left San Francisco:

Massachusetts has a flat personal income tax rate of 5.2%. California uses a progressive rate topping out at 13.3% at and above $1 million of income. In other words, 95% of Sandoval’s income would be taxed at this 13.3% rate if he re-signed with the Giants.

The Giants play in the National League West, which boasts three teams from California, including the Giants. This means that in addition to the Giants’ 81 home games, the team plays another 18 road games in California. The Giants also play three road games against their cross-bay rival A’s, bringing their total California games to 103.While Boston has to play ten games next year at the New York Yankees, it also has division opponents in Florida and Canada, where the players will pay no state income taxes (and no federal taxes in Canada).

Baseball players living in no-tax states have about 18.4% of their 2015 salaries sheltered from state taxes due to Spring Training taking place in tax-free states (Arizona does not tax Spring Training days). The Red Sox enjoy an additional 14.3% of tax-sheltered income from road games, while the Giants only get to shelter another 5.8%.

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