The National Basketball Association (NBA) is arguably one the most profitable professional sports leagues in the world generating billions of dollars every season. This naturally makes their players among the top-paid athletes in the world with contracts worth tens of millions of dollars every year. While the typical NBA fan would think that its players pocket the full amount of the contract, that couldn’t be further from the truth as they are subject to a variety of taxes depending on which team(s) they play for and against every season as well as other financial obligations such as agents fees. Truly understanding how much players make after tax requires an in-depth analysis and the consideration of a number of factors that vary from player to player.
How much do NBA players make after tax? Put simply, NBA players normally make about 50% to 60% of their contract after tax depending on the country and state or province they reside in within the United States and Canada respectively. Like all other citizens of the two countries, NBA players are subject to federal, state, and city taxes as well as jock taxes that are payable in all cities where they play. Foreign players are also subject to special tax and withholding rules that are determined by the Internal Revenue Service (IRS).
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Types of NBA Contracts
How much an NBA player makes after tax boils down to the type of contract they are signed to. NBA players typically earn a lot more income that the average citizen due to their special skillset which sets them apart from the rest.
To put things into context, only around 450 players are capable of playing in the NBA at any one time making it a truly exclusive group of individuals. Through their multi-year Collective Bargaining Agreements (CBAs), players qualify for a share of a little over 50% of the league’s revenue.
Having hit the $10 billion-dollar revenue mark for the first time in its history in its 2021-22 season, it is fairly easy for NBA teams to hand players, especially stars, multi-year contracts worth hundreds of millions of dollars.
Below are the different types of contracts as per the NBA’s salary cap rules and the terms of their current CBA. It is important to note that only NBA contracts use the Uniform Player Contract (UPC) in the CBA as a reference point.
Rookie Scale Contracts – these are agreements that NBA teams sign with their first-round draft pick in a given season. The deal consists of two guaranteed seasons and team options for years three and four. The size of the contract depends on how high a player is picked in their draft. For example, the first pick in the 2022-23 NBA draft is set to make a little over $9.2 million.
Designated Veteran Player Contracts – NBA players with eight to nine years of experience qualify for these contracts in free agency provided they play for one team or change teams only through trades in their first four seasons in the league. Qualified players earn between 30% and 35% of the salary cap in any given year which is currently well over $32 million.
Max Contracts – these are only reserved for elite players who meet certain requirements. They include: winning the MVP award anywhere from year two and either selection to any of the three All-NBA or winning the Defensive Player of the Year honor in year four or in two seasons between years two and four.
A player’s years of experience also factor in there as it determines what percentage of the annual salary cap their max contract will be set at. Those between 0-6 years qualify for 25%, those with 7-9 years receive 30%, while those with 10+ years of experience are eligible for the maximum of 35%, which is currently well over $38 million.
Supermax Contracts – these are reserved for elite players who have played at least seven years with the team that drafted them in the first round of their draft and signed them to their rookie deal. Qualified players with at least two years left in their deal are eligible for a four-year supermax while those with one year left can sign a five-year supermax.
Elite free agents with over eight years of NBA experience also qualify for a five-year supermax which may earn them upwards of $38 million in their first season of the deal and well over $50 million towards year five in some cases.
Two-Way Contracts – these agreements allow players to play for both an NBA team and an NBA G-League affiliate. It is meant to help develop a player by offering them playing time in the G-League while simultaneously providing them with a pathway back to their NBA team and can thus only be signed by players during their first four years in the league. Players on these deals earn upwards of $75,000 per season in the G-League and half of the minimum rookie contracts, which currently total around $508,000.
Other types of NBA Contracts – Over 38 Contracts (for players over 38 years old or who will have turned 38 during the term of their current deal), 10-day Contracts, Exhibit 10 Contracts, Summer Contracts, Rest-of-Season Contracts, Non-Guaranteed Training Camp Contracts, and Veteran Minimum Contracts (currently at around $2.6 million per year).
Tax Deductions for NBA Players
As was previously mentioned, NBA players are subject to different types of taxes. They are:
- Federal taxes – these depend on a player’s country of residence (USA or Canada).
- State taxes – these vary from state to state. Players residing in states like Florida and Texas pay no income tax.
- City (municipal/local government) taxes – these also differ from city to city. Players residing in cities in Texas – Dallas (Mavericks), San Antonio (Spurs), and Houston (Rockets) and in Florida – Miami (Heat) pay no income tax.
- Jock taxes – NBA players are required to file jock or non-resident income taxes for every city where they play league (road) games with the exception of Florida, Texas, Washington and Washington, D.C., and Ontario (Canada) which are the only states and provinces without jock taxes.
Tax deductions for player bonuses (incentives such as an X amount of money if say a player shoots 40+% from three or attains a certain free-throw percentage in a given season) and endorsements from cooperate deals naturally also factor in but will not be considered below as their intricate details are not always available to the public.
Player Case Studies
Below are some practical examples of how the above taxes would apply to an NBA player. For this case study, we will use two of the league’s biggest stars who also happen to be on the list of the top five earners for the 2022-23 season – Lebron James and Stephen Curry.
Stephen Curry – the Golden State Warriors point guard leads the league in salary at $48,070,014. The three-point specialist deductions include 37% in federal tax as well as around 12% in both state (California) and city (San Francisco) taxes. Put simply, the four-time NBA champion likely pays up to 55% of his income in taxes or around $26 million leaving him with around $22 million after tax.
LeBron James – the four-time NBA MVP is set to make $44,474,988 for his 2022-23 season. The LA Lakers forward will however have to pay a federal tax of 37% and state and city taxes of 12.3%. James also maintains a residence in his home city Akron, Ohio which costs him around $150,000 extra.
On account of his sizable income from the NBA and numerous endorsements and dealings, James paid taxes amounting to $50.9 million in 2022. The four-time NBA champion will only likely keep a little over $23 million from his salary in 2023.