Do you know how much income tax you pay? Have you ever sat down and calculated the exact amount? It will vary depending where you live, and if you have I applaud you. I did it once when I was younger, and I now I just know what my “ballpark figure” is.
Calculating my own taxes is about as exciting as a root canal, so having to calculate how taxes impact NHL players is near the bottom of my list of things I want to do for work.
However, it is becoming more of a factor in the NHL as team’s try to find ways to maximize their salary cap. A $9.5 million contract in Tampa Bay will give a player more net salary than a $9.5 million contract in Toronto according the the chart below. But is there more to it?
The chart courtesy of CapFriendly.com illustrates the difference in take home pay (net salary) for players in 31 different markets.
**Based on a $9,500,000 contract, and it doesn’t consider agent fees, escrow and travel taxes.***
| TEAM | FEDERAL RATE | STATE RATE | CITY RATE | ESTIMATED TAX RATE | TAX PAID | NET SALARY |
|---|---|---|---|---|---|---|
 Anaheim Ducks |
39.14% | 13.06% | – |
52.20%
|
$4,958,553 |
$4,541,447
|
 Arizona Coyotes |
39.14% | 4.53% | – |
43.67%
|
$4,148,431 |
$5,351,569
|
 Boston Bruins |
39.14% | 5.10% | – |
44.24%
|
$4,202,670 |
$5,297,330
|
 Buffalo Sabres |
39.14% | 8.59% | – |
47.73%
|
$4,534,551 |
$4,965,449
|
 Calgary Flames |
– | – | – |
47.70%
|
$4,531,315 |
$4,968,685
|
 Carolina Hurricanes |
39.14% | 5.75% | – |
44.89%
|
$4,264,420 |
$5,235,580
|
 Chicago Blackhawks |
39.14% | 3.75% | – |
42.89%
|
$4,074,420 |
$5,425,580
|
 Colorado Avalanche |
39.14% | 4.63% | – |
43.77%
|
$4,158,020 |
$5,341,980
|
 Columbus Blue Jackets |
39.14% | 4.97% | 2.50% |
46.61%
|
$4,428,057 |
$5,071,943
|
 Dallas Stars |
39.14% | – | – |
39.14%
|
$3,718,170 |
$5,781,830
|
 Detroit Red Wings |
39.14% | 4.25% | 2.40% |
45.79%
|
$4,349,920 |
$5,150,080
|
 Edmonton Oilers |
– | – | – |
47.70%
|
$4,531,315 |
$4,968,685
|
 Florida Panthers |
39.14% | – | – |
39.14%
|
$3,718,170 |
$5,781,830
|
 Los Angeles Kings |
39.14% | 13.06% | – |
52.20%
|
$4,958,553 |
$4,541,447
|
 Minnesota Wild |
39.14% | 9.81% | – |
48.94%
|
$4,649,717 |
$4,850,283
|
 Montreal Canadiens |
– | – | – |
53.06%
|
$5,041,116 |
$4,458,884
|
 Nashville Predators |
39.14% | – | – |
39.14%
|
$3,718,170 |
$5,781,830
|
 New Jersey Devils |
39.14% | 8.81% | – |
47.95%
|
$4,555,194 |
$4,944,806
|
 New York Islanders |
39.14% | 8.59% | – |
47.73%
|
$4,534,551 |
$4,965,449
|
 New York Rangers |
39.14% | 8.59% | 4.25% |
51.98%
|
$4,938,301 |
$4,561,699
|
 Ottawa Senators |
– | – | – |
53.17%
|
$5,051,383 |
$4,448,617
|
 Philadelphia Flyers |
39.14% | 3.07% | 3.91% |
46.12%
|
$4,381,270 |
$5,118,730
|
 Pittsburgh Penguins |
39.14% | 3.07% | 3.00% |
45.21%
|
$4,294,820 |
$5,205,180
|
 San Jose Sharks |
39.14% | 13.06% | – |
52.20%
|
$4,958,553 |
$4,541,447
|
 St. Louis Blues |
39.14% | 6.00% | 1.00% |
46.14%
|
$4,382,945 |
$5,117,055
|
 Tampa Bay Lightning |
39.14% | – | – |
39.14%
|
$3,718,170 |
$5,781,830
|
 Toronto Maple Leafs |
– | – | – |
53.17%
|
$5,051,383 |
$4,448,617
|
 Vancouver Canucks |
– | – | – |
47.42%
|
$4,504,528 |
$4,995,472
|
 Vegas Golden Knights |
39.14% | – | – |
39.14%
|
$3,718,170 |
$5,781,830
|
 Washington Capitals (D.C.) |
39.14% | 8.73% | – |
47.87%
|
$4,547,370 |
$4,952,630
|
| Washington Capitals (Virginia) |
39.14% | 5.75% | – |
44.89%
|
$4,264,162 |
$5,235,838
|
 Winnipeg Jets |
– | – | – |
50.15%
|
$4,764,595 |
$4,735,405
|
Tampa Bay, Nashville, Dallas, Vegas and Florida (Top group) have the largest after tax take home ($5.351 million) while Toronto and Ottawa ($4.448 million) and Montreal ($4.458 million) (bottom group) have the least.
Edmonton and Calgary are tied for 18th in net salary at $4.968 million.
However the rankings between teams aren’t always the same.
For instance, a player with a $1 million salary in Edmonton would be tied for 22nd in net salary with $548,685. While a player in Montreal has the lowest net salary at $490,234 behind Toronto and Ottawa at $498,667. The Top Group is still at the top with players on those five teams netting $647,830.
The difference from top to bottom is over $150,000 on a $1 million salary.
PAID IN AMERICAN DOLLARS
Every NHL player is paid in American dollars, including those playing in the seven Canadian cities. So can Canadian players, who live year round in Canada, make up the tax gap by being paid in US funds.
A Montreal player with a $1 million salary who nets $490,234 US dollars will make $643,341 Canadian based on today’s exchange rate.
So that $643,341 is close to the top group’s $647,830. So the exchange rate could help players during the months they reside in Canada. But that only benefits them when the US dollar is as high as it is now, or higher, but when the Canadian dollar inches closer to even par this argument become moot.
The other factors we have to consider are cost of living, which is higher in New York, Vancouver and Toronto than in most other cities, but I won’t dive into that land mine.
I believe we will see some players, not all, look at tax implications when they sign with a team. But moreso if you are any of the Top Group teams, you should be using the tax implications as why a player can take a little lower salary, so the team has more money to spend on other quality players, because his net salary will still be the same as someone who makes more in higher taxed cities.
For instance. Nikita Kucherov just signed an extension worth $9.5 million, and if you compare that to John Tavares $11 million/year contract it looks like Kucherov took less. But if you look at his net salary it is virtually the same as Tavares in Toronto.
Tavares makes $11 million in Toronto and his net salary is $5.145 million, while Kucherov’s $9.5 million salary in Tampa Bay nets him $5.781 million. Kucherov still has a higher net salary playing in Tampa Bay, even though Tavares gets paid $1.5 million more in Toronto.
Leon Draisaitl makes $8.5 million in Edmonton and he will net $4.448 million, while Ryan Johansen makes $8 million in Nashville, but his net salary is still higher at $4.875 million.
**Now, keep in mind that the tax implications are mitigated a bit because when Tampa Bay players play a road game in Toronto or Ottawa, they pay that tax rate, but that is only on half their 41 games, and also depends on travel days etc. It isn’t exact as stated above, but it does illustrate the advantage Tampa Bay can have in getting their star players to take a lower cap hit, but still make as much money as other star players with a higher cap hit in different markets.***
Whether we like it or not, tax implications will likely become more of a discussion point when looking at players salaries from team-to-team. It isn’t as easy as saying player “A” signed for $4 million, so player “B”, who is the same caliber, needs to sign for the same amount.
It was very difficult to accurately compare players when we used points and analytics, but it could get muddier as more teams and players discuss the differences in net salary from city to city.
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Great article. Great research done.
I read somewhere that you are taxed based on where you “worked” (played your game). Is this true? It sounded like this was true for American players and that the calculations are actually closer then first thought of.
I dont believe this is true. If I am sent out of country for training/conferences I am still paid and taxed on where my office is. I am no accountant or professional in this matter, but I would assume it is the same for professional athletes. Just because they are on the road playing a game they wouldn’t be taxed any differently.
If you are sent out of the country for training/conference you are not generating income and so you are not taxed. If you are out of the country teaching at a conference you are generating income. That income is taxed differently depending on where you are.
If the company I work for sends me for training I’m still generating income for myself.
Yes, it is true they get taxed on road games, so Kucherov will get taxed more on road, but that is only half his games and doesn’t really make up the difference in gap. It lessens it, yes, as I wrote above, but TB still has a big advantage over Toronto for instance.
Thank you for the reply Jason! I suppose some of the biggest disadvantaged markets would be in California (they play what, 51 games in Cali?)
Aren’t there loopholes where they can get paid most of their “salary” as a bonus and then put that money into an investment? Also, can’t the big dollar athletes summer down in the States, and as long as they count that as their residence, get taxed at the rate based on where their residence is? I thought there are loopholes for the guys that are smart with their big salary, to stash it away, and get taxed on it later on when it is withdrawn in smaller installments, after it has gained interest.
You are taxed based on where you are ordinarily resident – ie where you have your home and live for most of the year. If you live for eight-ten months in Florida and spend the summers in Canada, you’re ordinarily resident for tax purposes in Florida.
One thing that hasn’t been mentioned that makes this a bit more complicated is that American citizens who are living abroad and make more than $100,000 will pay American taxes in addition to the taxes in the jurisdiction in which they are ordinarily resident. So US-born players signed to Canadian teams will take a double tax hit (unless they have some very creative accountants).
uh nope, google Jock tax. Gregor is correct, you are taxed where you play the game or where you are declared located for that day of pay.
further and US citizen or resident is obligated to file american taxes regardless of their residency. They are one of 2 countries in the world that does this and have tax treaties in place with the majority of other countries. The CRA has an obligation through FATCA to report and accounts or revenue for a reported american tax payor to the IRS. As for the 100K that is not a set limit, you may or may not owe taxes no matter how much money it is. And final to that is double taxation does not usually happen as the tax treaties provide tax credits when taxes are paid in the other country. Double taxaxtion only happens when strategies in one country are not recognized by another one. For Example the US does not recognize TFSA accounts, and Americans may be subject to income tax on the growth inside it as well as annual trust fees.
The accountants dont need to be creative, they need to be smart.
There was just an article about Tavares, that if he were to live in Florida 3 months of the year, he could claim that as his residence and claim under that tax rate. Plus, because most his contract is bonus, his actual salary is just over million per year, or whatever it is, he can invest that bonus and pay tax on it later as it is withdrawn.
Sheltering money is not just a tax scheme for the rich, it’s financial planning. Take pay stub deductions for example. Let’s say when filling out that federal and provincial tax form, instead of claiming the minimum, the maximum RSP amount gets deducted from that paycheck. More will get deducted from the gross amount, but the pay amount drops into a lower tax bracket and is taxed less. When it comes tax time, the tax return is a larger amount, gets invested into a registered RSP and gains interest. The invested amount gets taxed later on as it is withdrawn.
Most NHL players aren’t in the same world as McDavid and company. A good amount of NHL players don’t plan their finances and don’t have anything to fall back on after their short hockey careers. They end up broke and find the transition difficult. The Oilers are actually a really good franchise in how they help retired ex Oilers make the transition into everyday life after hockey. Once an Oiler always an Oiler. They even help retired hockey players that haven’t played for the Oilers.
Most of us don’t plan ahead financially. It’s crazy when you think about it. If you are sick you go to a doctor. If your car is broke you go to a mechanic. People don’t know how to spend money, but not many people will see a finacial adviser.
I work for a financial planning firm, our office has many pro athletes, and the following are designations people have in the office.
CFP, CLU, CIM, TEP, CFA, CA, we have a wealth of experience in financial planning and investment. And no you can not defer the signing bonus, it is income, you pay income tax that year. Than he can invest it.
Also, too bad the chart isn’t sorted by highest to lowest tax (or something similar). I understand the alphabetic listing. And I agree with McNugent, great article and research!
I thought it was impossible to make Ottawa less appealing, but I was wrong. Great article.
great article; i suppose at the end of the day the salary cap does ensure a more even field
I think it would make a lot of sense for the NHL to go a system that puts a salary cap on player earnings after taxes. It would take away the advantage that the income tax free states have over the rest of the league, and would even out the playing field. The fact that Kucherov is counting less against the cap than Tavares despite their numbers the past two years, plus the fact that Kucherov is 3 years younger, is slightly insane to me. It makes sense when you realize he’s actually taking home more money than Tavares though. I realize that free agency inflates numbers, but Tavares left money on the table to play in Toronto. The less tax a team has to pay, the more cap space they have to play with, it just doesn’t seem fair to me.
I would want a limited No Trade clause if I took less because of the taxes. Business is business.
I wonder how the Salary implications work with the massive signing bonus’ being handed out. Lets say John Tavares gets paid his 14 million bonus July 1 where does the state tax apply to?
Whats with Washington? If you live on the other side of the Potomac you get a tax break? Hmmmm They taxation without representation sucks man!!
would it be possible for an NHL player to incorporate, and have that corporation sign a contract with an NHL team? the corporation would get paid, and pay it’s corporate rate of tax. The player could hire himself as an employee of his NHL contracted corporation, and pay himself a nominal salary. The corporation would pay any of his work related expenses like agent fees, off season training, dietary advice, etc, and get that tax break. Other professionals can incorporate and be hired as a contractor, why not NHL players, or any professional athlete?
I think it is safe to assume that professional athletes are finding and using as many tax advantages as they can but this is not likely an option. It would be very difficult to argue that you are an independent contractor when you have a single client.
No – professional athletes are not allowed to incorporate and sign a contract. However it does make sense for them to do so for their endorsement deals, which depending on the player can create a large tax deferral for themselves.
(within Canada – not sure on the US)
The CBA requires a “Player” sign a contract. Under contract law normally it’s just a legal person, which could be a corporation or an actual person. Otherwise a team would sign a contract with a professional corporation, then that professional corporation could hire another employee to provide the services.
Neat informative article.
As for it’s implications across the league, I think it’s being taken a bit overboard and too literal lately. The teams use it as a marketing tool to sign players just as they do a new arena or a favourable climate, other than that I think an $8mill centre is an $8mil centre anywhere across the league. I doubt the agent and player send out what their price will be to each individual city.
I’m sure there are a few guys that base their signing on absolute most net income, in which case common sense would say those players just don’t sign somewhere like NY or California for obvious reasons… but the vast majority of them openly factor in multiple variables such as lifestyle, family, climate, hometown etc.
On top of that, in our beautiful democracy we can put in a government that drastically changes the tax landscape overnight. Thankfully if that happens, our quality of life drastically increases proportionally to our taxes… right?
See told you Benning, Drake, Lucic and Leons contracts weren’t overpaid, they might acually be less. ?
JUst saw Maroon signed in Stl for $1.75 mill. Quite the drop. Wasnt he projected to be closer to a four mill guy?
Maroon fired his agent and hired a new one this past week…suggests to me that maybe an error was made in previous negotiations. I sense they missed out on the July 1 signings…I can see why Maroon would be super pissed. He should have got at least a 3-year deal…something went sideways.
Patrick Maroon signed with the Blues. 1yr x 1.75 M
I thought you were going to compare Cagguila to Maroon and then watch OilersNation burn in the comments section
Good article… but other taxes factor in as well such as property tax, sales tax, vehicle registration fees. I understand it’s impossible to make simple comparisons on these lines because the are heavily influenced by individual housing choices and consumption habits … just saying city to city Salary comparisons r tough. I’m sure many players have accountants run even more detailed numbers than presented in this article.
Why would property tax matter? Most NHL players rent when they play in Edmonton for instance. They don’t pay tax when renting. Vehicle registration fee? Seriously? You think that $10-$50 difference from city to city will matter? And how much does average person in BC pay for PST? If a player gets paid $1 million in Vancouver he would take home $1500 more than a player making $1 million in Edmonton. Pretty sure that $1500 will offset the vehicle registration or PST. I don’t think your suggestions really impact the decision at all. It is a marginal difference.
Jason, is it not only their salary that is affected by where they play road games. The signing bonus would be tax based on the state/province the team is in, correct? Also, would the remaining salary be split up via games or 365 days in a year?
I have to look that up. But I’d think the gov’t would ensure they don’t miss out on all the revenue. I will check.
Canadians are taxed based on residency, Americans are taxed based on citizenship.
americans are taxed based on residency and citizenship, citizenship basically obligates them to have to file an american tax return, doesnt mean that a canadian with american citizen ship or an american resident in canada neccessarily have to pay taxes to the US, but they have to file an american return.
Great info Gregor. I must be getting old when a tax story is one of my favorites of the summer.
So should I itemize or take the standard deduction?
The truly sad part is the amount of income tax we all pay. The last time I looked I was at about 28% and that was a while ago. I have since become self employed and found ways to mitigate some of the tax expense. But I am still around 30% due to my income rising. I find it borderline criminal, especially since there is zero chance anyone from Alberta will ever get fair and equal representation in Ottawa.
Reason number 2 I will be an expatriate living in Mexico before I am 50.
Don’t get sick…
You know Gord, I will maintain my Canadian Citizenship in case there was ever an instance I became terminally ill. But the typical medical costs for medical emergencies in Mexico do not even come close to the medical costs we have in Canada. Even open heart surgery in Mexico can cost between $150000-$300000 pesos. Or $10,000 to $20,000 CAD. That is in a private medical clinic with top notch care. The few times I have had the revenge, it costs me about 25 pesos or less than $2 to visit a doctor. Another $10 and I have the medicine I need to get me back on the taco train. Much less than a non insured check up here which starts at $100. Trust me when I tell you I have researched this.
This article includes a bit of an oversimplification of jock taxes. They don’t apply universally to all players in all road cities.
This goes against my entire belief system that the rich don’t pay enough taxes
Looks like the best places to play in the NHL, based on taxes are:
Texas, Florida, Nashville, or Nevada (only 39.14% tax).
The best Canadian city is Vancouver (47.42% tax). Very interesting.
In Vanvouver a hole in the wall costs 7 figures
Must be nice to make millions while playing a game you love… to live the dream!
Jason, did you read this article:
https://theathletic.com/411211/2018/06/27/why-taxes-shouldnt-prevent-john-tavares-or-any-free-agent-from-signing-with-a-canadian-team/
Everyone forgets but before Justin Trudeau and Rachel Notley got ahold of tax rates, Alberta was right up in the top 5 or 7 in the league with tax rates. I believe we were right around 39% total tax rate at the highest levels.
Too many broke socialists in the world. The funny thing is the only rich socialists are the ones propitiating the agenda. I like making my money and I like keeping my money.
Not sure where you get your facts. The US has more broke people than you can count, no healthcare and spend all of their free time pointing guns at each other. Not much socialism there. That’s what low taxes and selfish attitudes get you. And there is socialism in every society, it’s just about how much there is. The more selfish the population, the less there is (e.g. US). Next time you drive on a road or don’t have guns pointed at you by impoverished, uneducated populations, thank the fact that you didn’t get ‘keep’ all your money like you so selfishly wish to.
We were exactly 39%. 29% federal and 10% provincial. The NDP government then instituted a series of escalating tax brackets for high income earners as did the federal Liberals. Normally I don’t care so much as I’m unlikely to ever reach those brackets but when it effects my favourite hockey team dammit I’m pissed.
Speaking of salaries…if you want to a good laugh, go to Hockey Buzz by Eklund. (I swear, I could make better predictions than this guy..) Anyway, he believes Matthews deserves a HIGHER $$$ than McDavid. You need to read/listen to his reasons. Yes, I know he is kissing up to Maple Nation and creating click bait…still.
The league needs to have a separate cap for each team depending on the State or Provincial tax rate. It’ll take some work but nothing one accountant couldn’t figure out in a month. Either that or the NHL takes 50% of each players salary and that money gets paid to each state and province for all the players throughout the league. The remaining money (if there is any left) gets debursed like escro.
Because as it stands right now, Tampa has 20% more cap room than canadian teams. That needs to be addressed somehow
Interesting read. I for one would much rather live in the city i wanted to rather than pocket the extra cash.
Yes California has a high tax rate but id much rather live there than new york. Money isnt everything