Ever since he was a child in Brooklyn, N.Y., Robert Raiola realized one thing elementary about the U.S. “America,” he says, “is fixated with money and athletes.”
His personal love of sports activities has led Raiola to develop into a clutch participant in his personal proper — as an influential professional for the tax and accounting wants of high-net-worth athletes and others in the sports activities enterprise.
Known to many as the “Sports Tax Man,” Raiola, director of the Sports & Entertainment Group at accounting agency PKF O’Connor Davies, and a daily contributor to Sports Illustrated journal, additionally manages the funds of many coaches, sports activities broadcasters, skilled sports activities executives, and workforce house owners and buyers.
Yet the fast-paced, extremely targeted world of professional sports activities is not all the time the most receptive to sound financial methods and tax planning, Raiola says. Any sports-sector financial adviser or tax planner must ensure that younger athletes heading into their first skilled season perceive the worth of financial recommendation. This is also true for knowledgeable athletes, particularly gamers popping out of their preliminary contracts who typically want tax steerage when selecting their subsequent vacation spot.
“What players and good agents are starting to realize is that what may be the best gross deal might not be the best net deal,” Raiola says.
NFL free company is an effective instance. Each yr, the NFL sometimes has a gaggle of gamers whose preliminary contracts have expired undergo free company for the first time. No matter how massive a prime participant’s new deal may be, the gross quantity doesn’t account for taxes.
For occasion, Raiola factors to at least one comparatively current NFL free-agent signing. “A couple years ago the big number was $60 million of guaranteed money.” The “big number” Raiola refers to is the $60 million deal given to defensive celebrity Ndamukong Suh, who signed in 2015 for that quantity with the Miami Dolphins after enjoying 5 seasons with the Detroit Lions. In a Sports Illustrated column, Raiola identified that the gross-versus-net argument performed an enormous think about the place Suh finally determined to play.
Says Raiola: “For Suh and the Dolphins, $60 million turned into approximately $36 million after taxes. And if the Lions wanted to try to retain (Suh), I figured out that they would have to pay him approximately $65 million to net to $36 million.”
In brief, the X-factor might have been Florida’s lack of a state revenue tax. Meanwhile, enjoying in Michigan, which has a comparatively low state tax fee, at four.25%, (plus native taxes) would have equaled a less-profitable deal general.
“It was rumored that the (Oakland) Raiders were interested, but they would have had to pay approximately $70.1 million to make the same deal to Suh,” Raiola stated. “Fortunately for the Raiders, they’ll be in Las Vegas soon,” Raiola provides. “Nevada has no state tax for players to worry about.”
In reality, Raiola provides, professional groups in no-tax states, comparable to the Texas Rangers, Seattle Seahawks, and Dallas Cowboys “flaunt that, and put it in their pitch book,” when making an attempt to attraction to extremely coveted free-agent athletes.
In addition to giving gamers and their brokers steerage on taxation and learn how to reduce it, Raiola’s staff at PKF O’Connor Davies additionally assists with private financial planning, together with how greatest to save lots of, make investments, and develop financial belongings at the starting of their careers and over the long term.
Says Raiola: “I try to stress to all clients … that you’re going to wake up one day and find that you’re not going to make that kind of money anymore. And that it’s not just what you make, it’s what you save, and ultimately what you keep.”
Tax tips from Robert Raiola, the ‘Sports Tax Man’:
1. It’s not what you make, it’s what you retain: The general quantity that often makes the information headlines isn’t truly what athletes pull in. The gross quantity, all the time the bigger quantity, doesn’t account for taxes.
2. You pay the place you play (or work): The “jock tax” stipulates that anybody who earns revenue outdoors of their residence state is probably topic to further state and native taxes. If you earn money in a number of states — together with wages, winnings, talking charges, and so on. — talk to your tax advisor.
three. Leverage reciprocity to attenuate tax: Some neighboring states have reciprocal agreements. Let’s say you simply gained the Super Bowl in Minnesota however you’ve got North Dakota residency (ahem, Carson Wentz). Your $112,000 bonus could possibly be taxed at North Dakota’s 2.9% price as an alternative of Minnesota’s 9.85%.
four. Consult a tax advisor: Whether you concentrate on stealing bases, profitable Olympic medals, or tackling quarterbacks, you can profit from skilled recommendation from women and men who concentrate on tax, and wealth preservation.
Andy Frye writes about sports activities for Rolling Stone. Follow him on Twitter at @MySportsComplex .