CPA for Athletes in Austin

The short answer is that Texas has no state personal income tax, and for a high earner that gap is worth real money every single year. When a player who lives in a high-tax state moves the center of their financial life to Austin, the salary, the signing bonus, and the endorsement income that gets sourced to their home state stops carrying a second layer of state tax on top of the federal bill. That is the honest reason a cpa for athletes in Austin gets asked about domicile before anything else. The federal rules still apply in full, and the IRS treats a professional athlete as a taxpayer with wage income, self-employment income, or both, described across the IRS small business and self-employed pages and the general Form 1040 guidance. What changes in Austin is the state side, not the federal one.

Here is a worked example that shows the size of it. Say a player earns 5,000,000 dollars of salary and has it taxed as a resident of a state with a top rate near 10 percent. That state layer alone can run close to 500,000 dollars in a year, before you even count the games played in other states. Move residency to Austin, keep the same contract, and the portion of income that used to be taxed by the old home state at that rate is no longer taxed by any state, because Texas simply does not have the tax. The federal number on the Form 1040 does not move, but the state savings are what make the domicile decision so common among athletes. The catch is that no state income tax does not mean no tax planning. It means the planning shifts to getting the federal treatment of bonuses, endorsements, and agent fees right, and to defending the residency itself.

Domicile is a facts test, not a mailing address. States that lose a high earner are known to audit the move, so a real Austin domicile means your home, your voter registration, your cars, your bank, and the place you actually spend your off-season time all point to Texas. An athlete who claims Austin but spends most of the year and keeps the family home in the old state invites a residency challenge, and the burden of proof lands on the taxpayer. We help build and document that record so the move holds up. The federal filing itself is unchanged, and the IRS explains basic filing timing on its when to file page.

The common mistake is treating the Austin move as a magic switch and ignoring the states where games are actually played. Residency saves the home-state tax, but the so-called jock tax still applies to income earned while working in other states, and that is a separate problem we cover in another answer below. A player who assumes Texas residency wipes out every state tax gets a surprise when a road-game state sends a bill. Our tax strategy consulting team maps the residency and the multi-state exposure together, and our individual tax return team files the federal and nonresident state returns that follow. Set the domicile up correctly now and the no state income tax advantage holds year after year instead of collapsing under an audit.

Living in Austin removes the Texas resident tax problem, but it does not remove the tax other states charge on income earned inside their borders. This is the jock tax, and it is the biggest ongoing state issue for a Texas-based player. When your team travels to a state that has an income tax and you play or practice there, that state gets to tax the slice of your salary tied to the days you worked in it. The usual method is the duty-day allocation. You take the days you worked in a given state, divide by your total duty days for the season, and apply that fraction to your salary to find the income that state can reach. A cpa for athletes in Austin builds this schedule so each nonresident return reports the correct number. The federal return still pulls it all together on Form 1040, and wage income is documented on the Form W-2 your team issues.

Walk through the math. Suppose a player has 180 total duty days in a season and a 5,400,000 dollar salary, which works out to 30,000 dollars of salary per duty day. If 8 of those days are spent working in a state with a 5 percent income tax, that state can tax 240,000 dollars of salary, and 5 percent of that is 12,000 dollars owed to that one state. Repeat that across every taxing state on the schedule and you can end up filing a dozen or more nonresident returns in a single year. Because Texas has no state income tax, there is no home-state credit to soften those bills the way a player in a taxing state might get, so the duty-day count has to be exact. The IRS wage and employment framework sits behind all of this in the employment taxes guidance, and the underlying records that support the day count follow the IRS recordkeeping standards.

The count itself is where the money is won or lost. Duty days generally include not just game days but travel days, practice days, and required team activities, and different states define the pool slightly differently. Keeping a clean day-by-day calendar for the season is what lets us allocate correctly and push back if a state tries to tax days that were not actually worked there. Guessing at the split, or using the game-day count when the state uses total duty days, produces the wrong answer in one direction or the other. We keep the calendar and tie it to the pay records so every nonresident filing rests on something you can defend.

The common mistake is ignoring the road-state filings entirely because Texas has none, then getting a stack of notices two years later with penalties attached. Those states share schedules and know when a visiting team played, so unfiled nonresident returns get noticed. Filing them correctly and on time is cheaper than fixing them under a notice, and the IRS explains how to read any federal notice on its understanding your notice page if the federal side ever needs attention. Our individual tax return team prepares the full set of nonresident returns, and our tax strategy consulting team keeps the duty-day method consistent from season to season. Track the days as they happen and the jock tax becomes a routine filing instead of a yearly scramble.

Signing bonuses and endorsement income are taxed differently from each other, and getting the split right is a big part of what a cpa for athletes in Austin does. A signing bonus paid by your team is usually wage income, reported on your Form W-2, with federal income tax and payroll tax withheld like the rest of your salary. Endorsement and appearance income is different. That is business income you earn as an independent contractor, it comes to you on a Form 1099-NEC, and you report it on Schedule C. That endorsement money carries self-employment tax on top of income tax, and Austin does not change that, because self-employment tax is federal and Texas simply adds no state income tax to either bucket.

Here is the set-aside math on the endorsement side. Say you sign a shoe deal worth 400,000 dollars for the year and it lands on a 1099-NEC. That income owes federal income tax at your top rate plus the self-employment tax, which is 15.3 percent on the covered base and 2.9 percent for Medicare above it, reported through the self-employment tax schedule that flows into your Form 1040. A rough but safe reserve for a top-bracket athlete is around 45 percent of the endorsement gross, which on 400,000 dollars is 180,000 dollars set aside for federal tax. Because there is no Texas income tax, that reserve is federal only, which is simpler than a player in a high-tax state faces. You also get to deduct the real business costs of earning that income, from travel to a trainer to a portion of your agent’s fee, and those deductions are described in IRS Publication 535 on business expenses.

The bonus side has its own trap. A large signing bonus can be paid in one state and taxed by that state even if you live in Austin, depending on where the contract was signed and the services were performed, so a bonus is not automatically state-tax-free just because you are a Texas resident. We look at the timing and sourcing of a bonus before you count on any state treatment. On the federal side the withholding on a supplemental bonus often falls short of your true top rate, so a seven-figure bonus can leave you owing more in April even after withholding, which is why we run the numbers when the bonus is announced rather than when the return is due.

The common mistake is spending endorsement checks as if they were take-home pay, because unlike a paycheck no tax was withheld from that 1099-NEC money at all. An athlete who treats a 400,000 dollar deal as 400,000 dollars of spending money is short the entire tax bill when it comes due. The fix is quarterly estimated payments on the endorsement income, using Form 1040-ES and the IRS payments portal, so the tax is funded as the money arrives. Our bookkeeping team tracks the endorsement income and its deductible costs, and our tax strategy consulting team sets the reserve percentage and the quarterly schedule. Fund the tax as each deal pays and the endorsement side stays clean instead of turning into a surprise balance.

Two questions come up constantly for players, and a cpa for athletes in Austin answers them together because they interact. First, agent fees and career costs. When you earn endorsement and appearance income as an independent contractor, the ordinary and necessary costs of earning it are deductible against that income on Schedule C, and that includes the agent commission tied to those deals, marketing costs, business travel, and training that relates to the endorsement work. The rules for what qualifies are laid out in IRS Publication 535, and the travel and meal specifics sit in IRS Publication 463. The wrinkle is that fees tied to your team salary, which is W-2 wage income, are not deductible the way fees tied to your 1099 endorsement work are, so the same agent’s bill often has to be split between the two income types.

Second, the entity question. Many athletes run their endorsement and marketing income through a business entity rather than reporting it as a sole proprietor, and there are real reasons to consider it, from liability separation to the option of an S corporation election on Form 2553 once the income is large and steady. The choices are described on the IRS business structures page. Here is the Texas-specific point that surprises people. Texas has no personal income tax, but it does levy a franchise tax, sometimes called the margin tax, on business entities through the Texas Comptroller at comptroller.texas.gov. So forming a Texas entity for your endorsement money can trade a small state franchise tax exposure for the liability and planning benefits, and whether that trade makes sense depends on the numbers.

Here is a worked example of the split. Suppose your agent charges 3 percent on a 5,000,000 dollar salary and 15 percent on 800,000 dollars of endorsement deals. The 150,000 dollar fee on the salary is a personal cost against wage income and is generally not deductible, while the 120,000 dollar fee on the endorsements is a business expense that reduces your Schedule C profit directly. Knowing that split changes how the agent structures the invoice and how much tax you actually save, so we ask for the fee breakdown in writing every year. The same care applies to training and travel, because a training camp that relates to your endorsement obligations can support a deduction while general conditioning tied only to your team job usually cannot, and the line between them has to be documented rather than assumed. We keep a written record for each cost that ties it to the income it helped earn, which is exactly the support the IRS expects behind any business deduction on your return. That habit also makes the entity question easier, because once the endorsement income and its real costs are tracked cleanly, the decision to run them through a Texas business and possibly elect S corporation treatment rests on numbers you can trust rather than a rough guess. Small entities that elect S corporation status file a Form 1120-S, which is a separate return with its own rules.

The common mistake is forming an entity because a teammate did, without running the franchise tax and payroll cost against the benefit, or deducting the full agent fee when half of it relates to nondeductible salary. Both errors surface in an audit and both are avoidable with a clean set of books. Our tax strategy consulting team models the entity decision with the Texas franchise tax included, and our bookkeeping team keeps the endorsement expenses documented so every deduction holds up. Decide the structure on the numbers now and you keep both the liability protection and the deductions working in your favor as the deals grow.

The defining fact of an athletic career is that the big money arrives fast and does not last long, so the tax and savings plan has to fit a compressed window. A cpa for athletes in Austin builds around that timeline, because a player might earn most of a lifetime of income across a handful of prime years and then need it to carry decades. The first tool is retirement saving through a business plan on the endorsement income, since that income is self-employment income you can pair with a solo retirement plan, and the rules for those plans are described in IRS Publication 560. Contributions to a qualified plan reduce this year’s federal taxable income while building a balance for the years after the career ends. Texas adds no state income tax to any of this, so the entire benefit of deferring income shows up on the federal return, tracked through your Form 1040.

Here is a worked example of the deferral. Suppose in a peak year you have 700,000 dollars of endorsement profit on Schedule C and you fund a solo plan with 66,000 dollars. At a top federal bracket that contribution saves roughly 24,000 dollars of federal tax this year, and because Texas has no income tax there is no state tax being deferred, only federal, so the whole 24,000 dollars is a clean federal saving. The money then grows tax-deferred until you draw it in the lower-income years after you stop playing, when your rate is likely far below what it is at the peak. That rate difference between the high-earning years and the retirement years is the heart of the strategy, and it is why front-loading retirement contributions during the prime seasons matters so much for an athlete. We coordinate this planning with your own financial advisors rather than managing any investments ourselves.

The compressed window also changes how we handle the estimated taxes and the cash reserve. During the earning years the quarterly payments on endorsement income are large, and we schedule them on the 2026 federal due dates of April 15, June 15, September 15, and the following January 15 using Form 1040-ES so no penalty builds under Form 2210. Just as important, we plan the drawdown so that after the career the withdrawals and any deferred money come out at a measured pace, keeping the federal rate low across the long retirement rather than bunching income into a few taxable spikes.

The common mistake is planning as if the peak income will keep coming, so the player skips the retirement contributions and the reserve during the exact years those tools are worth the most. Once the career ends, the high bracket that made deferral valuable is gone, and the chance to shelter that income at the top rate does not come back. If you want a plan built around your real timeline, you can Request Private Consultation and we will map the earning years and the years after together. Our tax strategy consulting team designs the deferral and drawdown schedule, and our individual tax return team files the returns that carry it out. Start funding the plan in the prime years and the short career turns into long financial security.