Massachusetts has a relatively high income tax rate, making contracts for nonresident professional athletes signed there less lucrative than contracts signed for teams in other states. In this article, Reed Smith's Michael Jacobs and Jason Feingertz discuss how nonresident athletes can use signing bonuses to reduce their state income tax burden when signing with a Massachusetts team.
Tom Brady's “Deflategate” suspension and the resulting litigation have provided sports fans across the country with a quick lesson on the laws surrounding collective bargaining agreements. However, those who paid careful attention to the details of the case may have also learned an important lesson about the benefit of tax planning for professional athletes. Specifically, Brady's choice to have a substantial portion of his 2016 compensation paid in the form of a signing bonus not only helped to protect Brady from a loss of income during any suspension imposed by the NFL, but this choice may also have helped reduce the amount of Brady's income subject to Massachusetts personal income tax.
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