While players’ salaries don’t necessarily cover the extra games tacked on to winners’ schedules, winning teams will split a pool of money set aside each year by the league – which is paid out to those who make the playoffs and the team that ultimately wins.
This year the pot is about $22 million – up from $20 million last season – the NBA told FOX Business. Last year, SBNation estimated that each player on the Golden State Warriors – the team that took home the trophy – could have received about $221,000 (which assumes the money is split evenly among a 15 person roster). That bonus is larger than what is earned by winning NFL and NHL teams.
However, the way the bonuses are allocated isn’t so simple. Extra money is awarded to teams that finished first in their conference, for example, and for the team with the best overall record. The pot is funded by items like gate receipts.
While players could receive more this year, that money does not count against the salary cap, but does count toward total league compensation to players, Victor Matheson, a sports economics professor at Holy Cross, told FOX Business.
And the bonuses may seem much smaller after taxes kick in.
The money will be taxed like income, which means for the Golden State Warriors it is subject to the 37 percent federal rate and state income taxes (13.3 percent in California), Tony Argiz, chairman and CEO of accounting firm Morrison, Brown, Argiz & Farra, told FOX Business.
However, in Canada taxes are even higher. American players in Canada pay tax on their Canadian-sourced income. Most athletes will be subject to the maximum rate of 53.53 percent (combined federal and provincial) on the income earned while playing there. As U.S. residents, they will also be taxed by the IRS on all income, where the top federal rate is 37 percent.
Players on both teams also pay what are known as “jock taxes” or taxes on income earned in other U.S. states. These taxes are usually calculated by dividing the number of workdays spent (practices and games) in the state by the total number of workdays, but some states just use games played. Players pay taxes equal to the highest rate in either their resident or non-resident state. They get credit for the taxes in the lower-tax state.
For playoff bonuses, players will be subject to taxes in the states where they played throughout the tournament, Robert Raiola, director of the sports and entertainment group at PKF O'Connor Davies, told FOX Business. That means if the Raptors win, for example, they will pay taxes in Milwaukee and Philadelphia. The Warriors played in Portland and Houston.
Total tax liabilities are hard to determine at this time, Raoila noted, because it is not known where each team will begin their season next fall.
Overall, players are required to file returns in every state where they play.
“An NBA player needs an all-star accountant every bit as much as he needs a feathery touch on his mid-range jump shot,” Matheson noted.
Nevertheless, the championship bonus is chump change compared to the salaries of some of the league’s top players. Golden State Warriors point guard Steph Curry earns about $37.5 million in gross wages each year, while Toronto Raptors star Kawhi Leonard earns a salary of nearly $20.1 million.