State Income Tax Explained: States That Cost Athletes the Most

State income tax is levied on top of federal taxes, by 41 states across the U.S. Some state levy high income tax rates above 10% like California, while others may not impose one at all.

Lets say two players sign the exact same contract, on the same day, for the same dollar amount.

One ends up with hundreds of thousands of dollars more in his pocket than the other, and neither team, neither agent, and neither gross figure headline had anything to do with why.

The difference is the state each player calls home, and more specifically, the state income tax rate attached to it.

Gross contract value gets the headline. What’s actually left after state and federal tax is the number that funds a mortgage, a jumbo loan, an investment account, and everything else that comes next.

What Is State Income Tax?

State income tax is a tax levied directly by individual states on the income their residents, and in many cases, nonresidents, who earn money within that state bring in each year.

Unlike federal income tax, which is the same nationwide, state income tax varies enormously depending on where someone lives and where they earn their paycheck.

As of 2026, nine states levy no broad-based personal income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Every other state taxes income at rates that range from a small flat percentage to double-digit rates that only kick in at very high income levels.

See the APSM State Athlete Tax Glossary for state-by-state breakdowns of state tax rates, cost of living averages, and real estate market appreciation values for every state in the union.

Top Marginal Rate vs. What Gets Paid

This is the single most misunderstood part of state tax coverage, in sports media and everywhere else.

A state’s “top marginal rate” is the rate applied only to income above a certain threshold, not the rate applied to the entire paycheck.

California has the highest top marginal income tax rate at 13.3%, which applies to income above $1 million for single filers.

That 13.3% doesn’t apply to a player’s whole salary; it applies only to the portion above that threshold, with lower brackets taxing everything beneath it.

Hawaii follows at 11%, then New York at 10.9%, and New Jersey at 10.75%, and for New York specifically, city-level tax stacks directly on top of the state rate, with New York City residents facing a combined state-plus-city rate that can climb significantly higher on top-bracket income.

For a player earning a high seven-figure or eight-figure salary, almost the entire paycheck falls inside the highest bracket, which is exactly why state residency carries so much more financial weight for professional athletes than it does for most taxpayers.

Why Athletes Face a Tax Situation Most People Never Deal With

A typical W-2 employee pays income tax to one state: wherever they live and work.

Professional athletes deal with something far more complex, commonly called the “jock tax.”

The Jock Tax: Taxed Everywhere You Play

States and cities with an income tax are generally allowed to tax nonresident athletes on the income earned specifically for games played within their borders, not just their home state.

This means a player based in a no-tax state like Texas or Florida still files state tax returns in nearly every state with an income tax that their team visits during the season, each one taxing a slice of that day’s pay.

The math is typically based on “duty days”, the number of days spent working within that state’s borders divided by the total working days in the season, applied to total compensation.

A road trip through California, New York, and a handful of other high-tax states can generate tax filings in a dozen-plus jurisdictions in a single season, regardless of where the player actually lives.

Why Home-State Residency Matters

Even with the jock tax applying to road games, where a player establishes legal residency still matters immensely, because residency determines the tax treatment of the largest chunks of income: base salary for home games, signing bonuses, and off-season income like endorsements.

A player who establishes residency in a no-income-tax state and structures things properly can meaningfully reduce their total state tax exposure compared to a player with identical earnings who calls a high-tax state home, even though both pay some jock tax on the road.

This is exactly why so many athletes establish permanent residency in Florida, Texas, Nevada, or Washington, even if they spend significant time in other states for the season.

It’s also why “no income tax” doesn’t automatically mean “no tax planning needed”, duty-day filings, residency rules, and how bonuses get sourced all still require real attention.

No Income Tax ≠ No Taxes

This is the trap a lot of relocation advice glosses over, and it applies to athletes exactly the same way it applies to anyone else.

States without income tax still need revenue, and they typically make it up through higher sales and property taxes.

Texas and New Hampshire illustrate this trade-off clearly, neither has a state income tax, but both rank among the states with the highest property taxes in the country.

A player who relocates purely chasing a 0% income tax rate, without checking property tax rates on the home they’re about to buy, can end up giving back a meaningful chunk of those savings somewhere else entirely.

This is exactly why the income tax conversation and the property tax conversation have to happen together, not separately.

Washington is its own special case worth knowing if you’re paying attention to the Pacific Northwest: the state has no general wage income tax, but it does apply a separate capital gains tax to certain high earners, 7% on the first $1 million of taxable Washington capital gains and 9.9% above that, after exemptions.

A new law signed in March 2026 also adds a 9.9% income tax on income exceeding $1 million annually, though it doesn’t take effect until 2028 and is widely expected to face a constitutional challenge.

“No income tax” isn’t always a permanent, simple label, it’s worth checking current law before treating any state’s tax status as fixed forever.

How This Plays Out for Contracts

Picture a player signing a multi-year deal worth a few million dollars annually who has a genuine choice of where to establish residency, a common scenario for free agents, trade situations, or players early enough in their career to plan ahead.

If that player establishes residency in a no-income-tax state, the home-game and off-season portion of their income avoids state tax entirely.

The same income, if taxed at a high-bracket state’s top marginal rate, can mean a difference of tens of thousands to hundreds of thousands of dollars annually, depending on the size of the contract.

That gap compounds.

Money that isn’t paid in state tax can instead go toward a down payment, get invested, or get applied directly to the kind of net income calculations that determine what a contract is actually worth once all the math is done, which is the same net income logic that applies to every contract breakdown.

The Bottom Line

State income tax is one of the biggest hidden variables in what a contract actually pays out, and it’s almost entirely determined by geography rather than talent or deal size.

Understanding the difference between a marginal rate and an effective rate, knowing how the jock tax applies to road income, and recognizing that “no income tax” doesn’t mean “no taxes at all” are the building blocks of actually understanding what a sports contract is worth in real, spendable dollars.

FAQs

Do professional athletes pay state income tax in every state they play a game?

Yes, in most cases. Through what’s known as the jock tax, states and cities with an income tax can tax nonresident athletes on income earned for games played within their borders, calculated using a duty-days formula that divides days worked in that state by total working days in the season.

Does living in a state with no income tax mean an athlete pays zero state tax?

No. Athletes living in no-income-tax states like Texas or Florida still file jock tax returns in every income-tax state their team visits during the season. What they avoid is state tax on home-game income, signing bonuses, and off-season earnings, not road-game income entirely.

What’s the difference between a state’s top marginal tax rate and what someone actually pays?

The top marginal rate only applies to income above a specific threshold, not the entire paycheck. California’s 13.3% top rate, for example, only applies to income above $1 million for single filers, with lower brackets taxing everything below that line.

Why do so many athletes establish residency in Florida, Texas, or Nevada?

These states don’t levy a broad-based personal income tax, so structuring residency there can meaningfully reduce state tax exposure on base salary, signing bonuses, and endorsement income, even though jock tax still applies to road games played elsewhere.

Is Washington State really tax-free for high-earning athletes?

Not entirely. Washington has no general wage income tax, but it applies a separate capital gains tax (7% to 9.9%) on certain high earners, and a new law signed in March 2026 adds a 9.9% income tax above $1 million starting in 2028, though it’s expected to face a constitutional challenge.