10 Ways For Professional Athletes to Reduce Tax Liability
Professional athletes can reduce their tax liability in several ways, including:
1. Utilizing retirement accounts: Contributing to a 401(k) or IRA can reduce taxable income and lower tax liability.
2. Deducting expenses: Athletes can deduct expenses related to training, equipment, travel, and other business-related expenses.
3. Taking advantage of tax credits: Tax credits can help reduce tax liability. For example, income taxes paid to other states may be used as a credit against your home state income taxes.
4. Utilizing charitable deductions: Donating to charitable organizations can provide a tax deduction while also supporting a good cause.
5. Timing income: Athletes can defer signing bonuses or other income until a later year when tax rates may be lower.
6. Establishing residency in a low-tax state: Athletes can save on state income taxes by establishing residency in a state with little or no income tax.
7. Utilizing income averaging: Athletes can use income averaging to reduce their tax liability by spreading income over several years.
8. Setting up a business: Athletes can set up a business to take advantage of business tax deductions.
9. Utilizing a tax professional: A tax professional can help athletes identify tax-saving opportunities and ensure compliance with tax laws.
10. Investing in tax-efficient strategies: Athletes can invest in tax-efficient strategies such as municipal bonds or exchange-traded funds (ETFs) to reduce tax liability.