Make Athletes Pay More Again: An Analysis of Jock Tax Issues following the 2017 U.S. Tax Reform

Abstract

In 2017, the Tax Cuts and Jobs Act (TCJA) was signed into law. Considered the largest tax overhaul in three decades, TCJA reduced federal individual and corporate income tax rates and doubled the standard deduction for all individual tax returns. However, the new law also removed items that traditionally helped professional athletes subject to nonresidential income taxes or ‘jock’ tax. In particular, professional athletes playing in states and local municipalities that implement jock taxes saw their federal taxes increase due to TCJA limiting their ability to claim nonresidential state and local taxes (SALT) or unreimbursed businesses expenses as itemized deductions in order to reduce their federal taxable income. As such, individuals paying jock taxes will have higher federal tax bills until TCJA expiration in 2025. The purpose of this project is to explore the overall impact TCJA has on professional athletes and how one can mitigate its issues.