Taxes for Athletes, Welcome to the Gig Economy

I'm an Athlete... Do I file taxes as a self-employed contractor?

YES! A contractor, self-employed worker or freelancer, can be anyone who is paid on a contract basis rather than as an employee. As an athlete, you likely have the same special considerations as contractors to think about during tax season and throughout the year. Keep reading to understand how to file your taxes like a contractor and how to keep it simple!

Athlete Taxes vs. Employee Taxes

What’s the Difference?

  • The good: Contractors can claim business expenses on their taxes that employees can’t
  • The bad: Thanks to the self-employment tax, even after those deductions you’ll probably end up paying taxes at a higher rate than your friends with office jobs.
  • The ugly: You might want to put the IRS helpline on speed dial because your taxes might get complicated. Schedule a complimentary tax preparation session with IRS-certified volunteers.

Even if I don't make enough money, am I required to file taxes?

Yes! Even if you do not owe a Federal income tax because you did not make enough money ($12,950-single, $25,900-married filing jointly, or $19,400-head of household), you may still owe self-employment tax.

In addition, if your W-2 or 1099 forms show any federal, state, or local taxes withheld and paid, you should file a tax return. In some instances you can receive a refund. If you have earned income and someone else cannot claim you as a dependent, you may also qualify for the Earned Income Tax Credit.

What is self-employment tax?

The self-employment tax covers your contributions to Social Security and Medicare. Employees split this tax with their employers—with the employer paying 7.65% and the employee paying 7.65%. As an athlete/contractor, you are responsible for paying the full 15.3%, but you get to deduct half that amount (the “employer half”) as a business expense.

Athletes/contractors likely need to make quarterly estimated tax payments during the year by filing form 1040 ES, especially if you owe more than $1,000 in taxes and your income substantially exceeds the tax payment limits listed above. Speak with a tax adviser for more information.

What You'll Need

Whether you file online, hire an accountant, or do it the old-fashioned way with a calculator, you’ll need the following to file your taxes:

The Basics on Income and Wages

As an athlete/self-employed contractor, your sources of income will likely be very different from the average person’s. Competition earnings and payments from social media promotions, appearances and product endorsements are all considered forms of athlete income! 

You will need the following income and wages documentation to file your taxes:

  • Form W-2 for each company in which you are employed
  • Forms 1099-Misc. and 1099-NEC for each type of income you receive (the entity/person paying you will send these)
  • Domestic cash receipts
  • Foreign revenue and earnings
  • Foreign and domestic competition earnings

Pro Tips!

It is best practice to set aside 10-15% of your income to pay taxes, especially if you made more from winnings, sponsorships, or stipends than in previous years.

If you don't understand what income is reporting on your forms 1099, ask the company that issued the form for a detailed report. Some items that are reported as income may be allowed as a deduction. For questions about income reported from the USOPC, contact USOPC1099@usopc.org.

The Basics on Deductions

Chances are you’re familiar with the general idea of deductions: They’re amounts that reduce your taxable income, which in turn reduces the amount of tax you owe. If you have $50,000 in income and $10,000 in deductions, then you owe taxes on only $40,000 of your income!

Everyone must choose between taking the standard deduction and itemizing deductions. If you itemize, you’ll need to add up lots of smaller individual deductions (such as deductions for interest paid on a student loan and for charitable donations). By contrast, choosing the standard deduction means you get to reduce your taxable income by a set dollar amount.

IRS Standard deductions

Walk The Line

Elite athletes (a.k.a. contractors) can take “business” deductions that employees can’t—and you can take these even if you don’t itemize your deductions! In tax lingo, that’s because business expenses count as “above-the-line” deductions—basically, they reduce your adjusted gross income. You can (and most certainly should) deduct your business expenses even if you don’t itemize but remember you generally report your business income and business deductions on an entirely different tax form (called Schedule C!).

Your business deductions can include:

  • Education and training expense
  • Equipment and uniform
  • Commissions and fees paid to agents and manager
  • Work-related treatments, such as massage or physical therapy
  • Work-related travel, meals and housing

Pro Tip!

Track these expenses throughout the year so you’re not left scrambling at tax time! Hang on to all your receipts and records for any sport-related expenses you plan on claiming. 

Self-Employment Expense Workbook

Athletes Only

Tax treatment of prize money

Olympic and Paralympic Games medals and prize money are typically not federally taxed unless you have very high income. See IRS 1040 instructions for detailed instructions.

State taxes on Olympic and Paralympic Games medals will vary by state.

Impact of federal benefits for athletes with a disability

Supplemental Security Income and Social Security Disability benefits generally are not taxed. However, athletes who have a disability may need to consider whether prize money may impact their eligibility to continue receiving these benefits.

Pro Tip! Eligible Team USA athletes with disabilities can schedule a one-on-one financial consulting appointment to discuss strategies to accomplish their financial and employment goals.

Should you incorporate?

Incorporating can lead to more paperwork and more complex taxes but can potentially help you claim some extra tax breaks.

Remember Me

  • Even if you do not owe a Federal income tax because you did not make enough money, you may still owe self-employment tax.
  • The self-employment tax covers your contributions to Social Security and Medicare. Employees split this tax with their employers—with the employer paying 7.65% and the employee paying 7.65%. As an athlete/contractor, you are responsible for paying the full 15.3%, but you get to deduct half that amount (the “employer half”) as a business expense.
  • Athletes/contractors likely need to make quarterly estimated tax payments during the year.
  • If one of your clients didn’t send a 1099 form, you still need to report that income.
  • If you travel a lot for sport, you may owe taxes in multiple states in addition to your federal taxes.
  • Starting with the 2018 tax year, you may also be able to deduct 20% of your sport-related income, depending on the details of your tax situation. Speak to an advisor for more details.

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