I have no idea who started this myth but now is the time to put it to rest. I have heard players say one million times that their overseas money is tax free. That is TOTALLY incorrect! Maybe in the very beginnings of overseas basketball it was the case, but definitely not anymore. While in some European countries your salary is taken directly from your check each month and the payment to the tax office is shared by your team, you are still paying taxes.
It is crucial for professional athletes playing overseas to be aware of the tax laws and regulations of the countries they play in. For instance, many basketball players playing in Germany may be eligible for a tax refund from the German Tax authorities, depending on the length of time they worked in Germany. It would be advisable to find a tax specialist in each country you live in to find out the advantages you may have by paying your taxes there.
However, it is important to note that hoopers are still required to pay taxes on their overseas earnings, both in the country they play in and in the United States. While the IRS offers a tax break for foreign income, it only applies to a certain amount of income. If you earn more than $104,000 overseas, then you are subject to be taxed for everything above that. Trust me, Uncle Sam is always going to get his cut.
Furthermore, athletes may still be liable for state income tax, depending on where they reside. Only seven states in the US do not have state income tax, and moving to one of these states or establishing a business there may help minimize tax liability. Those states are: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.
To avoid any issues come tax season, athletes should keep all necessary paperwork related to their salary and taxes paid in each country they play in. If no paperwork is supplied, then ask for it while you are overseas. You do not want to wait until you’re back home and then try to ask for the paperwork…you will never get it.
Don’t try to take shortcuts while filing your taxes either. I highly recommend to all hoopers that they work with a tax professional who is well-versed in foreign income and has experience with professional athlete clients. It may cost you a little bit more money but it will pale in comparison to what you’d ordinarily have to pay if the IRS comes after you.
It is essential for professional hoopers overseas to understand the tax laws and regulations in the countries they play in to avoid any tax-related issues. While a tax refund may be possible in some cases, it is important to remember that taxes are still due on overseas earnings. By staying organized and working with a tax professional, athletes can ensure they are prepared for tax season.