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Taxes could eat up Manning's Super Bowl earnings

If the Bronco's quarterback doesn't retire after Sunday's game, his earnings will fall victim to New Jersey's 'jock tax.'

By MSN Money producer Jan 28, 2014 4:03PM

By K. Sean Packard, Forbes.com Forbes.com


Peyton Manning has the opportunity to pull a John Elway and ride off into the sunset as a Denver Bronco after winning his second ring, not that he wants to retire. His career will hinge upon an offseason exam on his surgically repaired neck, according to ESPN's Chris Mortensen. Obviously, the most important implication of the exam will be Manning's health. But whether his career continues will have an effect on how much tax New Jersey can collect from him for his appearance in the Super Bowl XLVIII.

 

Denver Broncos' Peyton Manning answers questions during media day for the Super Bowl. © Matt Slocum/APShould the Broncos beat the Seahawks, Manning -- and the rest of his teammates -- will earn $92,000. The loser's share in the Super Bowl is $46,000. So why does Manning's future beyond Feb. 2 matter to New Jersey? It would seem logical that the Garden State would apply its tax rates on the $92,000 or $46,000 Manning earns for his week in East Rutherford. Unfortunately, we are dealing with tax laws, not logic.

 

New Jersey, and every other state that imposes a jock tax, taxes players on their calendar-year income from each employer. If the Broncos defeat the Seahawks, Manning's 2014 playing income to this point would be $157,000 derived from playoff bonuses. If the Broncos lose, his playing income would be $111,000.

 

If Manning is unable to continue playing, New Jersey would apply its tax rates to his income and multiply that amount by the ratio of 7/33 to determine his tax liability. The 7 in the numerator represents the week he spends in the state practicing and attending required NFL events. The 33 is the total number of duty days performed during the year -- 31 days in January plus two in February. If Manning is forced to retire, New Jersey will collect approximately $1,575 from him if the Broncos win and $982 if they lose.

 

But should Manning continue his career into the 2014 season, New Jersey will collect an additional $45,000 from him by taxing income he has not even earned yet. Manning is due $15 million next season, which would push his 2014 earnings to $15,157,000 or $15,111,000, and bump him into Jersey's highest 8.97 percent tax bracket. Luckily, his duty day ratio would go from 7/33 to 7/200, without regard to the Broncos' game at MetLife Stadium against the Jets next season.

 

If Manning is able to play next season, his New Jersey income tax would be $46,989 on $92,000 for winning the Super Bowl, or 51.08 percent. If they lose and he is able to play in 2014, he will pay New Jersey $46,844 on his $46,000, which amounts to a 101.83 percent tax on his actual Super Bowl earnings in the state -- and this does not even consider federal taxes.

 

Because the Broncos play at the Jets next season, Manning's effective New Jersey tax rate will be more in line with the state's tax table. He will pay roughly $60,414 if they win the Super Bowl and $60,229 if they lose based on allocable income of $682,065 or $679,995 (9/200 x total 2014 calendar-year pay). However, if the Super Bowl were held anywhere other than New Jersey, he would only be paying them $13,425 or $13,384 for his 2014 game against the Jets.

 

At this point his only tax-planning tools would be to retire or demand a trade in the offseason. A trade would mean that he will earn his $15 million for a team other than the Broncos, thus saving him about $59,000 in New Jersey taxes. This is because duty days are calculated separately for each team on which he plays. Of course he would have to choose his destination wisely, because there are very few NFL destinations that enjoy lower taxes than Colorado.

 

I am actually cheering for New Jersey on this one. Not because I want Manning to fund a state-mandated traffic jam, but because football is better with Peyton Manning. I think the residents of Nebraska's largest city would agree.


More from Forbes.com:

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108Comments
Jan 28, 2014 5:48PM
Jan 28, 2014 8:34PM
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Another reason to never have the Superbowl in NJ again
Jan 28, 2014 6:42PM
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They should not allow football in New Jersey. I would refuse to play there, and have the Giants relocated as well. They tax laws are a sham.
Jan 28, 2014 6:07PM
Jan 28, 2014 8:29PM
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This is like saying that if I lived in Maryland but went on a business trip to Florida, I would have to pay Flordia state income taxes for the two weeks I spent on my business trip in Florida. 
Jan 28, 2014 7:58PM
Jan 29, 2014 9:20AM
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All NJ needs is a mask and a gun.  This is stealing.  Fabricated laws tailored for a few is immoral.  I have been living here my whole life.  Never surprised by NJ's ability to create oppressive taxes while politicians get raises and perks. My property taxes are forcing me out of my house.  The problem is not taxing enough, its spending too much just to get re-elected by the free stuff voters. 
Jan 28, 2014 8:58PM
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My late CPA father would be appalled at another state/federal IRS scheme.  The tax code is over 4 million words and 16,000 pages....I think the late 60s Apollo Moon Project was less complicated. 
Jan 28, 2014 9:07PM
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Tax tax tax.  Socialism! Where everyone shares in the same misery! In an hour, you can listen to OblameO push for more of the misery! 
Jan 29, 2014 8:35AM
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You should see property taxes in NJ! THis doesn't surprise me coming from a libtard run state.
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Yankees... Wow why do people live in this cesspool state?? [was there ever an OLD Jersey?]

So if a commercial airs during the super bowl and it is picked up in Jersey, do THEY have to pay taxes too?

I'm surprised they dont have air stations for people to breathe that cost and collect those taxes too....

Jan 29, 2014 11:32AM
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A perfect example of why we need "LESS" government.
Jan 29, 2014 10:44AM
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I've heard Rush Limbaugh talk about this before after he moved from NY to FL.  If he even came back to visit NY and do a  show or 2 from the NY studios, he would get hit with a sizable tax bill, for "earning $ in NY".  I don't know if athletes have to pay tax to every state they play games in, but it really sounds like it's out of control.  I'm not sticking up for millionaires and they should pay their share, but all this sounds a bit excessive.
Jan 28, 2014 9:11PM
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why would you want to play in high tax states? Has Scott Walker made it profitable to play in Green Bay? If the packers were in it the tudra would sell out any time of the year!!!!!!!!
Jan 28, 2014 9:04PM
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how does jersey get to tax a nfl player if he dnt live or work in jersey he doesnt get payed by jersey state gov. is it cuz its a legal gambling state?

Jan 29, 2014 10:21AM
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Just another example of how screwed up our tax system is. It should not take degrees in finance and tax law just to figure out how to pay your taxes. With all the loop holes and people who just flat out screw the system its a wonder how any taxes are collected at all. This is why we need reform and for better or worse need to go to a fair tax (national sales tax) with all the states, counties, cities, following a similar plan (I have my own tweaks that I think should be included with a fair tax but still better than what we have now). That way everyone pays and its almost impossible to skip out on paying your share. Then we just have to get DC to spend it wisely...............


I think its time

Jan 29, 2014 11:32AM
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This is what's wrong with this country. Tax and regulations you have to live under that you would have no idea existed without expert legal council to guide you. How is a regular guy supposed to earn a living when he spends all his days trying to learn what taxes and regulations he has to comply with???
Jan 29, 2014 10:34AM
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The ex Yankee Robinson Cano will be able to retain an estimated additional 15 million dollars of his contract by signing with a team in the state of Washington rather than remaining in the NY/NJ taxing authority.
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