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Eyes To Free Agency - Tax Changes to Know

With July 1st quickly approaching, free agents in the NHL and NBA will be looking for the best landing spots for their future. Although there are many considerations when choosing a destination, being aware of the tax implications when signing with a new team should be on every athlete’s list. Over the past year, there has been an NHL team relocated and the states of Massachusetts and California add additional taxes that will further take a bite of athletes’ paychecks. Additionally, some states have reduced income tax rates to make their situations more appealing.

Arizona Coyotes Become Utah Hockey Club

With the relocation of the Arizona Coyotes to Salt Lake City, Utah, players’ lives have been altered. Although understanding the tax impact of the move is probably not at the top of the list of concerns, players should be aware. Additionally, free agents considering Utah as a destination should know how it stacks up against other potential destinations.

Tax Difference Between Utah & Arizona

Arizona provided the best tax situation of states that impose an income tax. The state only imposes a flat income tax rate of 2.5% and does not allow any municipality to impose income taxes. The only teams positioned in a better situation are those that are in an income tax free state.

Utah similarly has a flat income tax rate with no municipal tax, but the state imposes a 4.6% rate. In essence, the team playing in Utah compared to Arizona will cost players an additional $.02 on each dollar earned.

Impact on Players

Any of the players under contract with the organization will be the most impacted as they will be subject to income tax on the entirety of their income if they are residents. Additionally, players who play for any of the other 31 National Hockey League (NHL) teams will also be subject to tax. As non-residents, players will pay 4.6% tax to Utah on their earnings in the state, which is calculated based on a ‘duty day’ allocation. This formula takes the number of days the player spends in the state divided by the total number of days they perform services for the team, which includes training camp, preseason, and the post-season.

Although the visiting players will be subject to Utah tax, it will not impact the net take home equally. Players who are non-residents will receive a credit in their home state for their taxes paid to Utah to help alleviate double taxation. This credit would be the smaller of the tax paid to Utah or the tax they would pay on the income to their state of resident. In short, players who live in states with tax rates lower than 4.6% will ultimately have a lower net take-home while those who reside in states with a higher tax rate, will see no change in their net.

Where Does Utah Rank?

Players weighing a contract offer from Utah will want to understand the offer in relation to other teams. The unquestioned best situations are those teams located in states that do not impose income taxes (Dallas, Florida, Nashville, Seattle, Tampa, and Vegas). Otherwise, Utah is in the same tier as the next best situations, falling just behind Colorado and Carolina for maximizing take home pay. Below, is a graph to show how Utah compares to one of the best (Nashville) and one of the worst (San Jose) situations in the NHL.

Massachusetts’ “Millionaires Tax”

When Massachusetts voters went to the polls in 2022, one of the initiatives on the ballot was the imposition of a “surtax” of 4% on every dollar of an individual’s income exceeding $1 million. The inclusion of this additional 4% takes Massachusetts’ top tax rate from 5%, which is similar to many other states with professional sport franchises, to 9%. The uniqueness of the 4% surtax squarely puts Massachusetts in the conversation for the most unfavorable state of residence for professional athletes making over $1 million.

Although California (more on that later), New York (10.90%), New Jersey (10.75%), Oregon (9.9%), and Minnesota (9.85%) all have higher rates on paper, Massachusetts has moved itself from the top half of the league to the bottom in terms of most favorable income tax rates.

Impact on Non-Resident Athletes

Each state is entitled to create their own tax laws and tax calculations to impose on non-residents as long as it is equal and fair. There are two common methods for states to determine an athletes’ ‘jock tax.’ First, they may determine what the athlete’s tax on all of their income would be under the state law and then calculate the tax liability based on the percentage of income earned in the state. If Massachusetts were to follow this standard, any athlete with a salary over $1 million would feel the burden of the additional 4% surtax. Luckily, Massachusetts uses a second common method to determine ‘jock tax.’ The state first determines the total income earned while the athlete is playing in the state and calculates the tax based on that amount. Therefore, an athlete who lives outside of the state would need to earn over $1 million in the state before they would feel any impact of the surtax. Given most athletes would not play more than 5% of their games in the state, they would need to be making at least $20 million to feel an impact.

Playing for a California Team Hurts More

California already imposes the highest tax rate in the United States, with a 12.3% top marginal tax rate and additional 1% mental health and service tax on those earning over $1 million. Starting in 2024, California has removed the ceiling on the total earnings that it will impose it’s 1.1% state disability insurance tax on. In 2023, California required employerslocated in the state to impose a .9% tax on wages up to $153,164. This means the most an individual working for a California team, regardless of where they are a resident, would have paid was $1,378.48. Starting on January 1st, 2024, that same individual had to pay 1.1% on all of their wages. For an individual earning $1 million, this will cost them an additional $9,621.52.

The manner in which this tax is classified and imposed precludes any resident of California to take a tax credit for taxes paid to other states to offset the tax. Practically, California’s tax rates are already higher than any state so residents receive a full tax credit for taxes paid to other states.

Improving Tax Situations

In addition to being aware of the situations that will take more money out of an athletes’ paycheck, players and the team of their advisors should also take note of states that have provisions to lower their tax rates and provide players with more beneficial situations now and in the near future.


Starting on January 1st, 2024, Colorado has lowered their income tax rate from 4.40% to 3.5%. Additionally, no municipalities impose income taxes. After Arizona, which no longer has an NHL team, Colorado provides the best tax situation to hockey and basketball (after those states with no income tax).

North Carolina

North Carolina has implemented a rate de-escalator that will see their income tax rate drop from 4.75% in 2023 to 4.5%, 4.25%, and reach 3.99% starting in 2026. With no municipality income taxes, North Carolina is positioning itself to be one of the better situations in the coming years.


Ohio’s state income tax has been lowered to 3.5%, but the state allows cities to also impose income taxes, unlike the previously discussed Colorado and North Carolina. When considering a 2.5% income tax rate in Columbus and Cleveland for a combined 6% rate, Ohio falls more into the middle than other states discussed.


Free agency provides athletes the opportunity to choose their employer. Each player’s priorities will be different. Not every athlete will be looking for the highest paycheck as some might prioritize team success or location of the team. However, every athlete should understand the financial implications of making these decisions so they can make the most informed choice.


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