When Making More Means Making Less


Labor Day has come and gone, and, while fall isn't officially here, it's time to put away those summer whites. Never mind that the mercury is still hitting 100 degrees in parts of the country; forget about those pennant races still heating up in the AL West and NL Central. This weekend, the National Football League kicks off regular season play!

Earlier this year, Baltimore quarterback Joe Flacco won MVP honors in Super Bowl XLVII and signed a new six-year contract worth $120.6 million. It makes him the highest-paid player in the game, just ahead of New Orleans quarterback Drew Brees. But in a surprise twist that NFL statisticians would love, Brees will actually take home more money than Flacco. How? Taxes, of course!

Flacco plays his home games at M&T Bank Stadium in Baltimore. With his new contract paying him $20.1 million per year, the IRS will intercept $8.72 million of that paycheck. Maryland and Baltimore County will pick off $1.72 million more, for a total combined tax bill of $10.44 million, or 51.98%. Flacco will also pay a "jock tax" for several of his away games. For example, when he plays the Cincinnati Bengals on November 10, he'll owe Cincinnati's 2.1% earnings tax on his pay for that game. And he'll pay even more tax on his bonuses, endorsements, and other income.

Meanwhile, Drew Brees plays his home games at the New Orleans Superdome, with a contract paying him $20 million per year, $100,000 less than Flacco makes in Baltimore. Brees pays the same 39.6% income tax and 3.8% Medicare tax as Flacco, but Louisiana's top tax rate is just 6% (on income over $50,000), compared to Maryland's 6.25% (on income over $1 million). That difference might not seem like a lot, but it means Brees actually keeps $470,000 more per year than Flacco.

Regardless of profession, income, or location, it’s important to be aware of the different rules and how tax rates in different states may affect your bottom line. The fall season not only brings football and pumpkin pie – it’s also the best time to start strategizing for the upcoming tax season. Dual residencies and multi-state employees are always on the radar of the IRS and state tax agencies!