The Ochocinco Tax Deduction
April 16, 2010
So you’re a pro athlete and you’ve received tens of thousands of dollars in fines for illegal hits and over-the-top celebrations? Well don’t feel so anxious before that next missed practice, foulmouthed outburst at the refs, or horse collar tackle because that next move might result in a tax deduction.
According to CNBC Sports Business Reporter Darren Rovell, fines, which are actually classified as ordinary business expenses, are tax deductible once they have reached a value higher than two percent of a player’s total adjusted gross income.
The example used is that of the Cincinnati Bengals spotlight-loving and NFL fine-magnet wide receiver Chad Ochocinco. According to Rovell:
Fines are classified as ordinary business expenses, according to sports tax accountant Robert Raiola of Van Duyne, Behrens & Co.
In order to deduct, Raiola says the fines have to be greater than two percent of a player’s total adjusted gross income because the IRS stipulates that the first two percent of employee business expenses are not deductible.
But assuming Ochocinco-who made $4.75 million last season-paid the standard three percent to his agent Drew Rosenhaus, he’s already above the 2 percent or $95,000 floor.
So Chad Ochocinco, who was fined $30,000 for wearing a sombrero after a touchdown and another $20,000 after he flashed a dollar bill at an official during a replay challenge actually ended up paying $17,500 less in federal income taxes because of the $50,000 in fines. Raiola also remarked:
“Based on his tax bracket, every $10,000 in fines, will save him $3,500 in taxes,”
Knowing this, next season Chad should pick that sombrero and dollar bill back up and do the “Ickey Shuffle” in the end zone like there’s no tomorrow. He can thank me on tax day next year…