The Miami Heat offers coveted NBA free agent LeBron James a chance to play for the legendary Pat Riley; home games in warm weather near the South Beach nightlife; and perhaps most important — millions of dollars in income tax savings during the life of his contract.
That could be huge for James – and any of the top free agents — expected to make the maximum $16.6 million free agent salary next year, no matter where he signs.
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While James entertained pitches from a half dozen teams, including the Heat and New York Knicks, Martin R. Press, a tax attorney at Fort Lauderdale’s Gunster law firm and Brandon L. Chase, a summer associate with the firm, calculated the state income tax implications in states where James might play.
Using the Heat’s 2009-10 schedule and excluding Canadian taxes for the two trips the Heat made to Toronto, the pair determined if James stays with the Cleveland Cavaliers, his state income tax bill would be $894,228.
Although Florida doesn’t have an income tax, athletes are taxed for games they play in states that levy taxes. That means, if James joined the Heat, he’d pay $436,818 to other states. The same Florida tax savings also would apply if any of the free agents were to sign with the Orlando Magic.
Land instead with the New Jersey Nets, that bill would be $1.155 million. Or the Knicks, where he’d have to pay New York City taxes, too, and that’s a cool $1.449 million.
"New York is a wonderful state and [New York City Mayor] Michael Bloomberg believes it’s a wonderful place to play and live, but it’s going to cost you over $1 million," Press said.
The firm’s calculations do not consider real estate taxes or other sources of income, such as endorsement contracts, which also could be taxed.
The $16.6 million salary works out to $202,439 per game. Press and Chase applied each state’s tax rate for the number of road games played there. For example, the taxes were $15,891 for the one game in New York and $77,236 for the four games in California.