When a free-agent professional athlete chooses to switch teams and relocate to a different state and city, the state, and potentially local, taxes may have a huge impact on where they choose to go. For example, it was rumored that when LeBron James left the Cleveland Cavaliers in 2010 to join The Miami Heat, he chose to go to The Heat over The New York Knicks because top earning New Yorkers were dealing with the highest state and city income taxes in the nation.
Now that LeBron has made the decision to go back to Cleveland, what will the tax implications be? First, let’s go over the basics:
- James is leaving Florida, a state that has 0% state income tax. This means that LeBron was not taxed on the income he earned playing for The Heat at the state-level.
- James is moving back to Ohio, where he will pay not only state income tax, but also local taxes to two cities: Cleveland (where the Cavaliers play) and Independence (where the team practices).
- Another star NBA player, Kevin Love, is also moving to The Cleveland Cavaliers from The Minnesota Timberwolves. The addition of two star players to The Cavaliers is predicted to not only generate tax revenue to the cities, but also boost the local economy due to higher ticket sales, more tourism, and sale of promotional, team-spirit items.
So, how much will LeBron be paying in taxes? Kiplinger estimates that he’ll pay about $1.19 million in state taxes, just on his basketball salary. This does not include the millions of dollars he makes annually through endorsements, or the local taxes paid to Independence and Cleveland, estimated to be about $200,000, split between James and Love.
While James most likely considered the tax implications of moving back to The Cavaliers, it obviously was not a big enough factor to change his decision to go home.
For more information about Ohio Taxes, take a look at this article.
These free resources should not be taken as tax or legal advice. Content provided is intended as general information. Tax regulations and laws change and the impact of laws can vary. Consult a tax advisor, CPA or lawyer for guidance on your specific situation.