For professional athletes, coming into a considerable amount of
wealth at a young age brings with it many challenges.
Young athletes find it difficult to resist the temptation to
spend it all on a lavish lifestyle, complete with sports cars,
houses and jewelry.
As is often the case with most professional athletes
(basketball, baseball, soccer and football players), the career
span of a hockey player is a short one. According to Sports
Illustrated, an estimated 78 percent of NFL players are bankrupt or
face serious financial stress within two years of ending their
playing careers. In the same article, it states that 60 percent of
NBA players are broke within five years of retiring.
Given that financial mismanagement is common among professional
athletes, it is important that young hockey players establish a
solid, well-rounded plan that will help them preserve their wealth
for when their playing days come to an end. Many pro athletes
assume the money will keep flowing for years, but for the vast
majority, this is not the case.
In these complex times, it is important for a player to surround
himself with advisors who have the knowledge and experience to deal
with his unique needs. Seldom can one look to a single professional
who possesses ALL the skill sets required to cover the tax, legal,
investment and business issues that could arise.
A proper team should consist of an agent, lawyer, accountant and
investment professional. Such a team will provide the athlete with
highly specialized professional advice, and would provide crucial
"checks and balances" from independent and unbiased
Once drafted, athletes are often prey to an array of
"can't miss" business opportunities, many of which
come from friends and family. These business ventures range from
sports bars bearing the athlete's name, to fast-food
franchises, to motion pictures, to inventions — just to name
a few. While these "sexy" opportunities, in many cases,
draw the player's interest, it is important for the
player's team of advisors to weigh in.
Unlike a doctor or dentist, whose income normally rises over the
years, the earning curve — or lack thereof — greatly
affects how and what an NHL player should invest in. For example,
careful tax planning can have a significant impact on an
athlete's present situation and can produce results that the
athlete can benefit from post-career. Futhermore, subtle
differences, such as being paid over a seven-month period,
typically yield different advice.
Immediately following a draft, residency determination for the
NHL player should be one of the first items to be examined.
Income taxes will likely be an NHL player's largest outlay.
The choice of country of residence will greatly influence what
taxes the athlete pays. The various filing requirements of a
cross-border hockey player are complex and should be handled by
professionals who deal specifically in this area.
The Canada-U.S. Income Tax Treaty rules that prevent double
taxation are complex but offer those with an understanding of them
many planning opportunities. With Ontario's top tax rate of 49
percent, a player could be looking at a 14 percent reduction to the
top U.S. federal tax rate of 35 percent.
In addition, the U.S. affords a player the ability to deduct a
number of expenses related to his sport, including agent and
professional fees and training costs. As a result, an 18-year-old
Canadian player drafted by a U.S. team could drastically reduce his
overall tax burden, consequently increasing his after-tax cash
The high visibility and skyrocketing salaries of athletes have
not been overlooked by the Canada Revenue Agency and the Internal
Revenue Service. In view of the governments' quest for
increased revenues, a player must take the proper steps to ensure
his residency choice is properly documented. This is best done on
the advice of a cross-border tax professional.
Originally published July 2012
Jeffrey is a partner in the Audit & Advisory Group and has
established the firm's Sports & Entertainment Group.
Jeffrey deals with Canadian, American and International clients
handling a variety of issues including tax compliance and filing,
cross-border and residency planning, investment review and due
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The CRA provides new housing rebates for individuals who have purchased or built a new house or have substantially renovated a house or made a major addition to a house who plan on living in it personally or letting a relative live there.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).