Thursday, January 06, 2005

On free agents and income taxes 

Good piece on espn.com on the tax implications of a player deciding where to play...

Given the state income taxes Beltran would have to pay if he signed with a New York team, the Mets or Yankees would have to offer him an average of $16.68 million per year to match (after-tax) the $16 million per year the Astros are offering.

Additionally, Congress has closed a loophole that exempted signing bonuses from FICA taxes. Every athlete is going to be over the social security cap (which I believe is at about $90,000 this year), but the 1.45% Medicare portion is uncapped. As of January 12, 2005, signing bonuses will be subject to the 1.45% tax just like regular salary is. If Beltran got a $20 million signing bonus as part of his deal before January 12, 2005, he would save $290,000 in Medicare taxes...not a bad little windfall...

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