The Super Bowl’s tax hit

A group favoring tax reform is betting that you’re going to feel sorry for New England Patriots quarterback Tom Brady.

Americans for Tax Reform, the Grover Norquist-led group most famous for pushing politicians to sign no-tax pledges, is out with its analysis of the tax hit that Brady will take by winning the Super Bowl and the Chevy truck that goes with being named the game’s MVP.

According to CNBC, the NFL pays a player on a Super Bowl winning team a salary of $97,000 for the game. Brady doesn’t appear to have any Patriots team bonuses for the game, so this is likely the amount we’re dealing with.

Brady will face income tax at the top rate of 39.6 percent. In addition, since this is a wage, he will also owe the top Medicare tax of 3.8 percent, half of which will be picked up by the NFL. Put those together, and Brady will pay $42,000 in federal taxes on the game.

Brady is giving the truck away to Malcolm Butler, the player who intercepted a pass to seal the win.

That’s going to cost him.

He’s going to have to pay gift tax on this transaction. The tax code only allows you to give $14,000 tax free from any one person to any one person before assessing a donor level tax on the gift.

Assuming this will be Brady’s only gift to Butler this year, the transaction sets up a taxable gift for Brady of $20,000 (the $34,000 value of the truck minus the $14,000 gift tax exclusion). Assuming Brady has made at least $1 million of taxable gifts up to this point in his life (a safe bet), he will owe a 40 percent gift tax on this $20,000 taxable gift.

That’s a $5000 gift tax on top of a $13,500 income tax on the truck, for a combined federal tax hit of $18,500.

If you’re Tom Brady, there’s an obvious way around that. Don’t accept the truck and tell Chevy to give it directly to Butler. Then it becomes his problem.

Or just drive it for a few miles, thus reducing the tax hit, according to one accountant.

If Brady’s wife consents to a split gift, there will be a $28,000 exemption. Moreover, the $34,000 value for the truck is a retail value when purchased new from a dealer. Once the truck is in Brady’s hands, it is arguable that the value should be discounted to some extent. Perhaps Brady should drive the truck for a couple of weeks before gifting it. There is one case allowing a discount.

A good accountant can probably make a lot of those other taxes disappear, too.

  • Gary F

    And the NFL is tax exempt!

    How much in child support will Bridget Moynihan get from Brady of this money for the child he fathered and dumped her before the child was born?

    • The league has non-profit status but the individuals teams do not.

      • Gary F

        That’s right.

        So the league made out like a bandit with all advertisement, ticket, and merchandise revenue and don’t have to pay taxes on it.

        All Mel Jass used to say “he’s got a good job”.

        • Yep, all the revenue goes to the league.

          Funny, ain’t it, that there are still anti-trust exemptions for professional sports leagues?

        • Nick K

          That is not true. “Every dollar of income that is earned in the National Football League — from game tickets, television rights fees, jersey sales and national sponsorships — is subject to tax. None of this income is shielded in a tax-exempt entity. Instead, the NFL’s 32 clubs pay tax on all of these revenues.” http://www.snopes.com/politics/taxes/nflexempt.asp

          • There are two companies involved here. For purposes of taxes, the individual teams are sort of a distraction.

            There is the NFL…which is non-profit. And there is a company called NFL Ventures, which is owned by the teams. It is for-profit.

            Merch goes thru NFL Ventures.

            The NFL as a league — the non profit company — is a trade association and gets its 503(C) because it operates in the public interest in the eyes of the taxing authorities.

            The non-profit NFL employes 1800 people and for the latest tax year on record, it had revenue of $325 million. It paid $102 million in salaries and claims after expenses it made $8 million. On its balance sheet it claims -$318 million.

            Goodell is paid his $44 million from that side of the organization.

          • Nick K

            You are leaving out an important fact. The NFL (the 501(c)(6) part) receives its money from dues paid by the NFL teams. “The funds received are not federally taxed, but they also cannot be declared expenses as a deduction due to the 501(c)(6) status. These funds are taxed as income once they are passed through to staff as salary, including to the commissioner, league office employees and game officials.” I’m not saying that any of this is right or proper, but the whole set-up is dodgy enough without making it appear worse than it is. http://www.cnbc.com/id/101884818#.

          • You mean it’s taxed as income to the NFL non profit?

            I assume that included in the $326 million in gross receipts reported on the 990 for 2013.

            That was pretty easily wiped away by the $1 million listed as “liabilities.”

            http://990s.foundationcenter.org/990_pdf_archive/131/131922622/131922622_201303_990O.pdf

  • Phil M

    So after taxes, Brady is clearing 36,500? For what, four hours of work? Yeah, hard to feel sorry for him, even in this worse case, “my accountant is an idiot who never heard of a deduction in his life,” scenario. That’s better than what some people make in a whole year.

  • Gary Winfield

    Soooo. he still ends up with 55g for probably an hours work, call 3 hours including prep. he is still getting paid by the pats for practice time in his regular salary. Yeah! I really cry for the guy(s). Plus if he keeps the truck he still owes taxes either way, but 55g. Hell i will take it any day of the week and twice over on Sunday.

    • kevinfromminneapolis

      With two weeks before the game I’d be willing to be Brady’s prep were well over 100 hours.

      • And keep in mind, Brady isn’t the one complaining.

        • Gary Winfield

          Brady still gets his regular paycheck too,. for his Prep time and practice. The point really being that our buddy Grover’s org should STFU. I would rather see the players get more money instead of the owners or the league.

      • David P.

        $97,000 / 100 hours = $970 hour.
        Plus the bonus (truck,) plus endorsements plus what the Patriots pay him. I wish I had Grover stepping up for me instead of Tom Brady’s taxes. Grover is whacky as always.

  • kevinfromminneapolis

    A good accountant can make a lot of things disappear.

    • Jack

      A creative accountant can make lots of things disappear. Not sure you want to call that a good accountant.

  • tboom

    Had an accounting instructor tell me “nobody ever goes broke paying taxes”.

    • John

      On occasion, I’ve said “I hope someday I have to pay millions in taxes.” People think that’s strange. I think it means I’ve made millions.

  • John O.

    When poor Grover has to resort to trolling to get media attention, you pretty much get the idea that he is becoming increasingly irrelevant.

  • Jack Ungerleider

    According the web site WhatsMyPercent.com, just the $97,000 puts Brady in the 65% percentile for married filers and the 79% percentile for all filers. (Add in the $34,000 for the truck and that goes up to 75% and 85%).