Great question Jacob - I don't know the answer to that. But I do have a guess.
I spoke with Richie Ramsay - he plays on the European Tour, and gave me some insight on how this works. It really depends on countries tax laws. I would imagine Canadians have to pay Federal and State Income tax. If they do pay taxes in Canada (whatever the benchmark is to a tax paying citizen) I would guess they can deduct the taxes they paid in the U.S.
A couple of notes on taxes - people in general don't pay taxes on the gross earnings - so players would deduct all their costs from the total and then figure the taxes, this will lower the tax amounts by a 1/4 to 1/3 depending on the player expenses. For state taxes, you're not taxed in two states, you generally either pay taxes in the state where the money was earned or in the state where you live. If you win in California, you pay CA state taxes and then generally get to deduct that amount on your home state taxes (if your state has taxes). If you win in a state that has no taxes like Florida and you live in a state that does have taxes you may have to pay state taxes on that win in your home state since you didn't pay in the state where you won. This may vary state by state based on their local tax laws.
What would a guy like Joel Dahmen expect to clear in endorsements? Obviously Spieth makes a fortune - over $10m/yr I’m guessing - but Dahmen is a good example of a top 50 golfer who may not be a household name. Is he making over $1m/yr in endorsements? That goes a long way in supplementing his tour money - or at least offsetting his expenses.
Forming an LLC will not save on taxes. LLC's are pass-through entities meaning the owner (the player) is taxed on their earnings or losses just like they went to him personally. There may be other logistics involved that make life simpler with an LLC but saving $ on taxes isn't one.
As Brad pointed out income is taxed on the net, not the gross here. Take all of the 'ordinary and necessary' expenses (in IRS speak) off the top before the player computes how much federal income tax he owes. In many ways the MVP of a player's team may be his accountant.
State taxes are beyond bizarre and complex, but you are essentially correct in that the state of a player's domicile will claim a piece of those net earnings, with varying degrees of offset based on how much tax he paid in the state in which the money was earned.
Nevada only hosts 1 PGA TOUR tournament (Shriners Open in Las Vegas). The second tournament, Barracuda Championship, was moved from Reno, NV to Truckee, CA in 2020. :)
Any insight on how it works for Canadian golfers? I.e. Nick Taylor, Adam Hadwin, Makenzie Hughes, Corey Conners etc.
Great question Jacob - I don't know the answer to that. But I do have a guess.
I spoke with Richie Ramsay - he plays on the European Tour, and gave me some insight on how this works. It really depends on countries tax laws. I would imagine Canadians have to pay Federal and State Income tax. If they do pay taxes in Canada (whatever the benchmark is to a tax paying citizen) I would guess they can deduct the taxes they paid in the U.S.
Easy to understand why Players reside in FL or TX
Very informational. For those who feel the need to "correct" the author, he wasn't looking to be exact, but just to provide rough numbers.
Thank you Tim!
Really enjoyed this Jared! Interesting to see how what state the tourney is played in effects net earnings.
Appreciate that AP!
A couple of notes on taxes - people in general don't pay taxes on the gross earnings - so players would deduct all their costs from the total and then figure the taxes, this will lower the tax amounts by a 1/4 to 1/3 depending on the player expenses. For state taxes, you're not taxed in two states, you generally either pay taxes in the state where the money was earned or in the state where you live. If you win in California, you pay CA state taxes and then generally get to deduct that amount on your home state taxes (if your state has taxes). If you win in a state that has no taxes like Florida and you live in a state that does have taxes you may have to pay state taxes on that win in your home state since you didn't pay in the state where you won. This may vary state by state based on their local tax laws.
Appreciate the detailed information Brad.
What would a guy like Joel Dahmen expect to clear in endorsements? Obviously Spieth makes a fortune - over $10m/yr I’m guessing - but Dahmen is a good example of a top 50 golfer who may not be a household name. Is he making over $1m/yr in endorsements? That goes a long way in supplementing his tour money - or at least offsetting his expenses.
Your guess is as good as mine on Joel - but I’d bet he’s making over $1 million a year on endorsements and any equipment contracts.
A couple of significant corrections here.
Forming an LLC will not save on taxes. LLC's are pass-through entities meaning the owner (the player) is taxed on their earnings or losses just like they went to him personally. There may be other logistics involved that make life simpler with an LLC but saving $ on taxes isn't one.
As Brad pointed out income is taxed on the net, not the gross here. Take all of the 'ordinary and necessary' expenses (in IRS speak) off the top before the player computes how much federal income tax he owes. In many ways the MVP of a player's team may be his accountant.
State taxes are beyond bizarre and complex, but you are essentially correct in that the state of a player's domicile will claim a piece of those net earnings, with varying degrees of offset based on how much tax he paid in the state in which the money was earned.
Also ignores the amount that goes to the pension system
Nevada only hosts 1 PGA TOUR tournament (Shriners Open in Las Vegas). The second tournament, Barracuda Championship, was moved from Reno, NV to Truckee, CA in 2020. :)
CJ Cup was at The Summit Club, wasn't it?