In March of this year, the City of Detroit officially codified its jock tax and released new income tax guidelines which clarify how professional athletes should apportion their income to Detroit for purposes of its city income tax, as well as guidance for teams on how to allocate income.
A “jock tax” is an income tax levied against professional athletes who earn money in a specific jurisdiction. With few exceptions, professional athletes owe income taxes in every state in which they play. Like Detroit, several cities and states around the country levy separate income taxes on professional athletes. Typically, for every dollar a player earns on his or her contract, “duty days” are assigned for the amount of days the athlete is in that specific city or state.
The City of Detroit’s definition of “duty days” includes practices, game days, training camp, days spent traveling on official team business and days on which other mandatory team activities take place. The jock tax also applies to injured players that travel with the team, as well as team coaches, managers, trainers, and all other persons that are required to travel with, and perform services for the team.
Ultimately, Detroit’s new method of defining duty days increases the amount of income subject to the city’s income tax. It appears to be the first jock tax in the U.S. to count a professional sports teams travel days as taxable income.
Additional details on Detroit’s jock tax can be found HERE on the city’s website.
To learn more, contact an attorney at Fraser Trebilcock at 517.482.5800 or by clicking here to fill out this form on our website.