A guideline for paying state income tax across multiple states
It’s Opening Day for all 30 Major League Baseball teams and it’s already clear the year is not going to be an easy year; their players will play in 15 states – 14 of them with an income tax. Why does that matter? Because states generally tax income where it is earned, meaning these players will have to file – and pay taxes – in more than a dozen states.
American League v. the National League
While the Orioles and Red Sox will play in the most states (16), they “only” play in 13 states with an income tax. That’s one argument in favor of the American League, which has teams in three states without an income tax (Seattle Mariners, Houston Astros, Texas Rangers and Tampa Bay Rays) and may be another reason why the Astros should not have moved to the American League. The National League now only has one team in a state without an income tax (Miami Marlins).
But, all 15 American League teams will play in Toronto, Canada, which will be more complicated than just filing one more state tax return – there’s an argument in favor of the National League. The American League teams, and four National League East teams playing the Blue Jays at home, will need to file in Canada and possibly pay Canadian income tax. When they file their U.S. return, they could qualify for a foreign tax credit to help avoid paying state income taxes on the income in both Canada and the United States.
Baseball is like life, including in tax
It’s not just the players who need to think about their tax obligations in multiple states. It’s also all the managers and coaches, the umpires, broadcast announcers, television crews and sports reporters.
And, it’s not just baseball: anyone who works in multiple states with income tax generally needs to file a tax return in those states, pay tax on their income apportioned based on their total income and get a credit in their resident state for taxes paid to other states. If they live in a state without an income tax, or they pay more to other states than their resident state tax liability would have been, too bad. The resident state won’t refund them money paid to another state, but it will credit them money paid to other states as if it was paid toward their resident state tax liability.
As for which team will win the tax season? It comes down to nine teams (the entire National League West and Athletics, Rangers, White Sox and Indians) that play in 11 states with an income tax. While baseball fans will have to wait until October to settle the world champions, the tax season winners won’t ultimately be decided until the following year.
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