Tag Archives: part-time residency

Watch Out Tom Brady, the Tax Man is Coming

by Alex Franch, Tax Specialist

As football season gets going, Tom Brady and the Patriots are almost back on top. I say almost because the Bills are ahead on the divisional record to the tiebreaker goes to the Bills right now.

Let’s consider the post-season for Tom Brady and when I say post-season, I really mean tax season. This case study applies to most professional athletes who play in multiple states, but I digress. I did a search for Mr. Brady’s contract and he seems to be making about $17 million per season just from his NFL contract. Let’s call it $1 million per game for argument sake and we will only consider the top tax rates when considering the states.

OK you fantasy football number crunchers, here we go. So far Mr. Brady has made $1M in Florida, no tax; $1M in Minnesota, top tax rate of 9.85%; and not $1M, but $3M in Mass, flat rate of 5.2%. But wait, in typical Brady fashion, he was still playing in January 2014 where he made $1M in Colorado, flat rate of 4.63% and not $1M, but $2M in, not Mass, but California, top rate of 12.3%. The internet tells me he moved from California to Massachusetts this year.

Let’s recap What Tom Brady’s Tax Return Looks Like So Far

 

Massachusetts part year resident: $3M income x 5.2% = $156K in taxes

Minnesota Non-Resident return: $1M income x 9.85% = $98K in taxes

California part year resident: $2M income x 12.3% = $246K in taxes

Colorado Non-Resident return: $1M income x 4.63% = $46K in taxes

But wait, he made $5M so far but he is getting taxed on $7M; that is not right. How very astute. Tom Brady will get a credit in his resident state for the taxes paid to a non-resident state. He should get the full $46k paid to Colorado as a credit to California.

But wait, he only gets back $52k out of the $98K he paid to Minnesota because the tax rate in Massachusetts is lower.

 

Graphic-1-4-State-comparison-Part-Year-versus-Non-Resident2

Total Income $5M, Taxes to the states $448K. Oh, he owes the IRS another $1.8M, I guess I forgot to mention that.

Now that is a flea flicker.

Only 13 more games to go. Maybe we should take this one game at a time.

. . . or one out of state rental property at a time
. . . or one out of state job at a time
. . . or one out of state K-1 at a time
. . . or one multi state business at a time

Do you have an out-of-state experience you would like to discuss? You may leave a comment below or go to our Facebook or Google Plus pages.

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