Now that the Super Bowl is behind us, and winter sports are around the halfway point of their regular seasons, those of us in the Northeast like to turn our attention to thoughts of warm weather and spring training. Fans have already begun to see players arrive at their spring training homes with the official start of MLB spring training upon us.

A little background on how taxes factor into MLB spring training

In states that have an income tax, nonresident professional athletes are taxed based upon their compensation earned for games played, or services rendered, in that state. Most states tax nonresident professional athletes on the duty day basis in which, for each tax year, duty days in state are divided by total duty days everywhere to arrive at a percentage of the athlete's compensation for the tax year that is taxed in each state.

Total duty days everywhere are generally measured from the beginning of the team's official pre-season training period through the last game in which the team competes or is scheduled to compete.

MLB Spring Training- Arizona and Florida

Major League Baseball's spring training takes place in Arizona and Florida, homes of the "Cactus League" and the 'Grapefruit League" (you can guess which state is the home to which league). A team’s training location depends on their geographic location in the U.S. (relative to Arizona & Florida, with some exceptions).

Florida

If you are a player with an eye on cash flow, you naturally wish your team's spring training site is in Florida because Florida has no income tax and the compensation you are deemed to have earned during the days of spring training would not be subject to income tax, while Arizona does have an income tax and, therefore, the compensation you are deemed to have earned during the days of spring training would be reduced by Arizona state income taxes . . . right? Not so fast.

Arizona

Arizona, unlike other states that tax professional athletes, defines duty days as "all days during a taxable year from the beginning of a professional athletic team's 1st regular game of the season through the last game in which the team competes or is scheduled to compete . . ." In other words, in a nod to Major League Baseball and the Cactus League, Arizona specifically exempts compensation deemed earned during spring training from taxation in Arizona.

Long story short....

So a player's preference for spring training in Arizona versus Florida will be dependent on factors other than the amount of income taxes they will pay. In this case, the tax tail does not wag the dog.

Questions? Contact me or any member of our Private Client Tax Services Team.