Canadian income Tax for wealthy Baseball players

[North_of_Border]

Justin Trudeau is gonna make the wealthy pay up to 40% tax on earnings. If im not mistaken. Im a Trudeau fan but this might hurt my team's chances.

Why would any FA want to sign with the Jays now?

Even the cheapest MLB player is considered a wealthy earner... Why would Price even bother considering it. Same with Estrada..... Even Kawasaki

Any accountants wanna answer this...

[Rbk_3]

http://www.tsn.ca/talent/westhead-why-montreal-is-the-worst-nhl-city-when-it-s-tax-time-1.106798


I don't know, but according to that Shea Webber pays 40% of his earnings in income tax and Tennessee doesn't have a state income tax.

[The Duke]

I think you're taxed on the games played in Canada at that Canadian Rate.
But trust me there are team accountant advisors, there to reduce the tax for players to the lowest amount possible.
Perception for players could be the hard part, But at the end of the day, I think its a minor issue and the tax cost is not hugely more then if playing on other teams.

[dagger]

For free agents signed before Dec. 31, it's also possible to pay them bonuses upfront, minus withholding, that would be taxed at their US rate rather than the new Canadian rate. Parliament is unlikely to meet before Christmas, and the proposed rate change will likely take effect for fiscal 2016-17.

[King of Canada]

Rich Canadians find all kinds of ways to pay ZERO taxes by owning companies that report a net loss or pay only in dividends. I'm sure there are lots of similar tricks for athletes.

[Skin Blues]

The US in general has a very similar tax burden at the top (all players are automatically in the highest bracket). It's 39.6% federally, and in places like NYC can run an additional 8%. Which is pretty close to the ~50% that it'd be in Toronto under Trudea's plan. Doesn't seem to have stopped players from signing with the Yankees (helps they outbid everybody too, obviously).

[Santoki]

The US in general has a very similar tax burden at the top (all players are automatically in the highest bracket). It's 39.6% federally, and in places like NYC can run an additional 8%. Which is pretty close to the ~50% that it'd be in Toronto under Trudea's plan. Doesn't seem to have stopped players from signing with the Yankees (helps they outbid everybody too, obviously).

People don't seem to understand that the US has high taxes as well. We tend to think here that the US is this tax-haven where people keep all their money and in exchange get no social services or healthcare.

In reality, NY and California tax rates are high and combined federally would see a wealthy person pay a similar amount of tax as they would in Ontario. There are so many more factors at play at luring top free agents than a few % points on the highest tax bracket.

[Skin Blues]

Yeah it's the corporate tax rates that people think about. Players won't get their effective tax rates down to 0% like Apple unless they start spending a ton of money lobbying the government.

[JN]

It is only a real pain in the ass for players that want their families to spend the entire season and offseason in Toronto. Live the offseason in the states, and include the travel days during the season, an accountant will find a way to significantly dampen the tax rate situation.

And as already mentioned certain states face high tax rates as well like California and New York. Texas and Florida teams have never really monopolized on their tax advantages (I guess its possible to argue the Rangers may have)

[CrookedJ]

The major threat for tax differential are the zero state income states - Florida and Texas. So the Rangers and the Astros have a bit of a leg up on everyone else, but I doubt that the Florida teams have any impact in FA.

[Rapcity_11]

Rich Canadians find all kinds of ways to pay ZERO taxes by owning companies that report a net loss or pay only in dividends. I'm sure there are lots of similar tricks for athletes.

Uhh, dividends are taxable...

Also not sure how owning a company that reports a net loss helps rich people?

[King of Canada]

Rich Canadians find all kinds of ways to pay ZERO taxes by owning companies that report a net loss or pay only in dividends. I'm sure there are lots of similar tricks for athletes.

Uhh, dividends are taxable...

Also not sure how owning a company that reports a net loss helps rich people?

YES, but in a different way and generally at a lower rate when it's all said and done. With a smart accountant and a corp owner willing to play ball the total tax bill can take a big cut.

[Rapcity_11]

It is only a real pain in the ass for players that want their families to spend the entire season and offseason in Toronto. Live the offseason in the states, and include the travel days during the season, an accountant will find a way to significantly dampen the tax rate situation.

And as already mentioned certain states face high tax rates as well like California and New York. Texas and Florida teams have never really monopolized on their tax advantages (I guess its possible to argue the Rangers may have)

A player could be potentially considered a resident of Canada during the season, regardless of where their family is. It's a fairly subjective area so I wonder what the precedent is.

[Rapcity_11]

Rich Canadians find all kinds of ways to pay ZERO taxes by owning companies that report a net loss or pay only in dividends. I'm sure there are lots of similar tricks for athletes.

Uhh, dividends are taxable...

Also not sure how owning a company that reports a net loss helps rich people?

YES, but in a different way and generally at a lower rate when it's all said and done. With a smart accountant and a corp owner willing to play ball the total tax bill can take a big cut.

Well yes, dividends are taxed lower, because they come out of after-tax dollars from corporations. The total tax is essentially the same (in most cases).

What do you mean a corp owner willing to play ball?

[King of Canada]

Uhh, dividends are taxable...

Also not sure how owning a company that reports a net loss helps rich people?

YES, but in a different way and generally at a lower rate when it's all said and done. With a smart accountant and a corp owner willing to play ball the total tax bill can take a big cut.

Well yes, dividends are taxed lower, because they come out of after-tax dollars from corporations. The total tax is essentially the same (in most cases).

What do you mean a corp owner willing to play ball?

I'm no accountant, but have taken some accounting when I completed my degree. lol Let me guess, are you an accountant?

I work in the insurance industry, and have seen clients who are self employed and incorporated. They get their pre-tax income as low as possible (even a net loss), and end up being taxed very little. They pay themselves only in dividends. You can have trouble getting income replacement coverage in these cases because it effectively looks like you're not earning any income.

[Rapcity_11]

YES, but in a different way and generally at a lower rate when it's all said and done. With a smart accountant and a corp owner willing to play ball the total tax bill can take a big cut.

Well yes, dividends are taxed lower, because they come out of after-tax dollars from corporations. The total tax is essentially the same (in most cases).

What do you mean a corp owner willing to play ball?

I'm no accountant, but have taken some accounting when I completed my degree. lol Let me guess, are you an accountant?

I work in the insurance industry, and have seen clients who are self employed and incorporated. They get their pre-tax income as low as possible (even a net loss), and end up being taxed very little. They pay themselves only in dividends. You can have trouble getting income replacement coverage in these cases because it effectively looks like you're not earning any income.

Yup, I'm an accountant. But by no means a tax expert.

Dividends come from after-tax dollars. So the benefits of the lower tax rate on dividends is lost because in order to pay dividends, the money had to have been subject to tax at the corporate level.

You can play around with the timing of losses and dividends to reduce or increase tax in a given year, but the total tax should be the same regardless.

I'm also not really sure how a professional athlete (in a major sports league) can get their pre-tax income anywhere near 0.

[King of Canada]

Well yes, dividends are taxed lower, because they come out of after-tax dollars from corporations. The total tax is essentially the same (in most cases).

What do you mean a corp owner willing to play ball?

I'm no accountant, but have taken some accounting when I completed my degree. lol Let me guess, are you an accountant?

I work in the insurance industry, and have seen clients who are self employed and incorporated. They get their pre-tax income as low as possible (even a net loss), and end up being taxed very little. They pay themselves only in dividends. You can have trouble getting income replacement coverage in these cases because it effectively looks like you're not earning any income.

Yup, I'm an accountant. But by no means a tax expert.

Dividends come from after-tax dollars. So the benefits of the lower tax rate on dividends is lost because in order to pay dividends, the money had to have been subject to tax at the corporate level.

You can play around with the timing of losses and dividends to reduce or increase tax in a given year, but the total tax should be the same regardless.

I'm also not really sure how a professional athlete (in a major sports league) can get their pre-tax income anywhere near 0.

Yeah, I'm just unclear if NBA players are paid as individuals, or if they are paid to holding companies? Probably hold co's right, which at least defers some taxation.