DALLAS — Dallas Cowboys quarterback Dak Prescott is now the highest-paid player in NFL history. Or at least he will be when his new four-year, $240 million contract goes into effect next season.
Prescott will earn a record $60 million per year -- the highest average salary ever -- and $231 million of his contract is guaranteed, also an NFL record.
But Dak's newfound level of wealth (on his current deal, he's only making $40 million per year) comes with another distinction: He'll have one of the highest tax bills in the league.
At the federal level, he'll indeed pay the most.
Of his $60 million salary, Prescott will owe around $20.1 million as part of the standard rate for his tax bracket, according to analysis from Jared Walczak at the Tax Foundation, a Washington-based tax policy and research group.
Despite the staggering figure, it's really not much of a surprise. The more you make, the more you pay in federal taxes.
From there, things can get complicated for pro athletes, depending on where they live and where they play their games.
In Texas, Prescott -- as everyone else in the state -- will pay exactly $0 in state income tax. That much is straightforward enough. Texas is one of nine states in the country with no state income tax.
But Texas' income-tax-free status doesn't get Prescott and his teammates out of paying income tax in states where the Cowboys play games. These so-called "jock taxes" vary from state to state but typically align with the states' own income tax rates.
Tracey Spivey, a KPMG tax partner in charge of the Family Office and Private by Design groups, said, generally, the jock taxes are typically calculated by "duty days," or the amount of time an athlete spends in a state for their sport, though some state taxes are calculated based off the game itself (as opposed to the whole trip).
In any case, there's no way around paying some state taxes for Texas athletes like Prescott, even while living in a state with no income tax.
Granted, the total number might seem like a drop in the bucket compared to federal taxes. But it's not nothing, and it also involves the complicated process of filing tax returns in numerous states.
Walczak ran the numbers for us on Prescott's new contract. First, a few notes on the analysis: While Prescott won't make $60 million until 2025, these numbers were based on the 2024 schedule -- since we don't yet know where the Cowboys will play next year. The goal here is to give a snapshot, not an exact yearly total. Also, this doesn't include the taxes on Prescott's $80 million signing bonus. It's not clear whether his contract was written in a way that would allow him to avoid state income tax (because he works in Texas) or if it will apply to the same jock tax rates. He'll still have to pay federal taxes on the bonus, regardless.
And lastly, these are all estimated figures -- they don't include any other write-offs or tax deductions Prescott might get. This is based on the standard federal and state tax rates, and how the state tax rates are calculated based on the duty days.
Here are the numbers:
Dak Prescott tax bill
Salary: $60 million
Federal taxes: $20.13 million
State taxes: $705,000
The state taxes are a combination of paying the "jock tax" for games played in Ohio, New Jersey, Pennsylvania, California, Georgia, Maryland, and North Carolina.
While $705,000 is not insignificant, it's definitely cheaper than the state taxes Prescott would pay if he played for certain teams in the league.
Using the 2024 schedule, Prescott would pay around $7.9 million in state taxes if he played for any of the California teams (Rams, 49ers and Chargers). If he played for either of the New York teams, which actually play their games in New Jersey, he'd owe around $6.4 million. Those higher tax figures are more due to higher tax rates in California and New Jersey than jock taxes.
Several teams would result in a slightly lower tax bill for Prescott, the lowest being the Jacksonville Jaguars, where he'd pay around $369,000 in state taxes. Florida, like Texas, has zero state income tax. But the Jaguars play more games in tax-friendly states (including their season opener against the Miami Dolphins).
Other teams with an estimated lower tax bill than the Cowboys this season include the Tennessee Titans ($597,000), Houston Texans ($673,000), Tampa Bay Buccaneers ($674,000), and Las Vegas Raiders ($702,000).
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