Lionel Messi’s Miami Debut, His Deal, and His Tax Situation
- Jul 18, 2023
All information in this article was taken from public sources. No client or confidential information was used in this compilation.
On July 21, against Liga MX’s Cruz Azul, soccer great Lionel Messi will make his Major League Soccer (“MLS”) debut for Inter Miami CF in a Leagues Cup match at the DRV PNK Stadium in Fort Lauderdale, Florida.
The highly anticipated arrival of Messi, captain of the reigning FIFA World Cup team, to the MLS is now official. The staggering Inter Miami contract proposed to Lionel Messi reportedly includes a $55 million salary; revenue from Adidas, Apple and Fanatics; and a percentage of Inter Miami stock when he retires.
Messi’s Miami deal will reportedly have him pay approximately $20 million in federal taxes on his $55 million income. The star soccer player, who is expected to surpass Michael Jordan as the highest-paid athlete in the U.S., will pay approximately $1.6 million in “jock tax” and $1.3 million in Medicare tax.
An entrepreneur in the sports industry, Andre Petcash, estimates that Messi could make $31.7 million in net income after joining Inter Miami. Lionel Messi, the highest-paid athlete entering MLS in the U.S. will be subject to a $23.3 million tax.
Professional athletes have to pay the jock tax in each state where they play, in addition to federal and state taxes. As opposed to an athlete's salary or bonuses, endorsement deals and other revenue streams are taxed differently.
The jock tax applies to additional sports professionals, not just athletes. Coaches, medical professionals and trainers are all required to contribute to the jock tax when they travel with their respective teams.
Depending on how many games, training days and duty days spent in each state and city, a professional athlete generally must apportion the income earned across the different states and cities (jurisdictions) played in, rather than submitting a single tax return to a single jurisdiction. Therefore, all income earned should generally be reported to the athlete’s state and city of residency where an income tax exists. Income earned in and tax paid to non-residency jurisdictions generally will be allowed as tax credits (subject to limitation) in the state and city of the athlete’s residency, thus limiting double taxation.
Florida is an ideal spot for highly paid athletes because it has no state income tax. That is not tax-free living when income is earned and taxed in other states; rather, playing for a team in Florida benefits athletes by lowering their overall tax burden. Therefore, Messi will still enjoy several tax benefits and won’t have to pay state income tax in Florida.
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Timothy Speiss is a Tax Partner in the Private Client Services Group and Vice President of EisnerAmper Wealth Planning LLC. He chairs our Asia Practice and is a member of the firm’s community service group, EisnerAmper Cares.
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