The astute agent of a professional athlete, through tax and financial planning, should maximize the athlete's income and minimize the tax bite on his earnings. Success is measured by the athlete's financial security at the time of his retirement from the work force rather than at the end of his playing career. One must strive to preserve capital and lessen any adverse tax consequences during the peak income period. A. Taxation Taxation is the application of tax rates to taxable income during a given tax year. To determine an athlete's tax liability one must calculate the gross amount of all income attributed to the athlete-taxpayer during the taxable year.
Income is a gain derived from any source whatsoever.
An athlete's gross income is where many of the athlete's expenses can be deducted. Gross income can be reduced by deductions for business-related expenses. Business-related expenses are all the ordinary and necessary expenses that are incurred by reason of an athlete's performance in an athletic event including the cost of tools of his trade, expenses related to maintaining a good physical condition, travel, professional services, business entertainment and necessary gratuities. In order to prove the deductibility of an expense, the athlete must maintain a system of record-keeping of expenditures so that the business expense deduction can be maximized and all expenses can be monitored to determine if they are excessive. Therefore, tax planning is imperative.