7 Tax Strategies Every Pro Athlete Should Know

Most athletes spend years building their career and a few weeks thinking about their finances. The athletes who come out ahead flip that equation. Tax strategy is not complicated when you start early and stay consistent. Here are seven moves that make a real difference.

1. Elect S-Corp Status Once Income Exceeds $40,000 to $50,000

If you are earning NIL or professional income through a sole proprietorship or a single-member LLC, you are paying self-employment tax on every dollar of profit. That is 15.3 percent before federal income tax even starts. Electing S-Corp status through your LLC lets you split your income between a reasonable salary and distributions. You pay self-employment tax only on the salary portion. At higher income levels, the savings are significant. Talk to your CPA about whether you have crossed the threshold where this makes sense.

2. Max Out Tax-Advantaged Retirement Accounts While Income Is High

Your earning window as an athlete is compressed. You have a limited number of years to take advantage of high income, and the tax code gives you real tools to shelter some of it. A SEP-IRA allows you to contribute up to 25 percent of net self-employment income. A Solo 401(k) allows even larger contributions and includes a Roth option. Money you put into these accounts reduces your taxable income today and grows tax-deferred or tax-free depending on the account type. The best time to fund these is when your income is at its peak.

3. Track Every Business Deduction Religiously

Agent fees, training costs, equipment, travel for business purposes, professional development, and home office expenses are all potentially deductible. But deductions you cannot document are deductions you cannot take. Build a system now. Save every receipt. Record what the expense was for and how it connects to your career. A simple app or a folder on your phone is enough to start. Your future self will thank you every April.

4. Plan for Multi-State Tax Obligations

If you play games or earn income in multiple states, you likely owe taxes in multiple states. This is called the "jock tax" and it applies broadly to professional athletes. Each state where you earn income may require a return. Some states have no income tax. Others have rates above 10 percent. The difference between planning for this and ignoring it can be a very large, very unexpected tax bill. Work with a tax professional who understands multi-state athlete taxation before the season starts, not after it ends.

5. Time Large Income Strategically Across Tax Years

Not all income timing is within your control, but some of it is. Signing bonuses, endorsement deals, and certain contract structures can sometimes be timed to fall in a lower-income year, which means a lower marginal tax rate on that money. This requires planning ahead. You cannot retroactively move income once it has been received. Have a conversation with your CPA at the start of any year where large income is expected. Even one well-timed decision can save a meaningful amount.

6. Use Charitable Giving Strategically

If giving back is already part of your plan, make sure you are doing it in a way that maximizes the benefit. A donor-advised fund (DAF) lets you make a large charitable contribution in a single high-income year, take the full deduction immediately, and then distribute the money to specific charities over time. This is particularly useful in a year when income spikes. You get the tax benefit now without having to decide exactly where the money goes right away.

7. Build a Tax Team Early, Not Just During Filing Season

The worst time to start a relationship with a CPA is February. By then, most decisions that could have saved you money have already been made. A good tax professional who specializes in athletes should be part of your team year-round. They help you set up the right business structure, advise on deal timing, plan around multi-state obligations, and make sure you are capturing every deduction available. The cost of professional advice is almost always less than the cost of not having it.

3 Immediate Action Steps

1. Pull your most recent tax return and note your net self-employment income. If it exceeded $40,000 to $50,000, ask your CPA whether S-Corp election makes sense for you this year.
2. Open a SEP-IRA or Solo 401(k) if you do not have one. Even a small contribution this year starts the habit and reduces your taxable income.
3. Book a strategy session with a tax professional before your next major contract, deal, or signing bonus. Go in with a plan, not just paperwork.

Athlete's Tax works exclusively with college and professional athletes to help them keep more of what they earn. Schedule a free consultation at athletestax.com.