Depreciation is the reduction in value of an asset over time due to wear and tear, obsolescence, or usage.
In finance and tax law, depreciation is also a non-cash expense that allows asset owners to deduct a portion of an asset’s cost each year, reducing taxable income.
In sports finance, depreciation is most commonly applied to real estate, equipment, business assets, and certain ownership structures, even when the asset itself may be appreciating in market value.
How Depreciation Applies in Different Leagues
NCAA / NIL Athletes
For NCAA and NIL athletes, depreciation often represents the first introduction to real tax strategy.
As NIL income grows and athletes begin forming businesses or purchasing assets, depreciation allows them to reduce taxable income without reducing cash, making early financial education critical.
Use Cases
- Rental properties purchased with NIL income
- Business entities formed around personal brands
- Content studios, gyms, or training-related businesses
- Equipment and business write-offs
Example
A college football player forms an LLC to manage NIL income and purchases recording equipment and a small office space for content production.
The equipment and business improvements are depreciated annually, reducing taxable NIL income even while the athlete remains in school.
For NIL athletes, depreciation is often the first real exposure to tax strategy, making education critical for avoiding costly mistakes.
NFL
NFL players frequently use depreciation as part of broader wealth and tax planning strategies.
With high earned income during relatively short careers, depreciation helps offset taxable income while allowing players to retain ownership of long-term assets like real estate and operating businesses.
Use Cases
- Rental properties owned by players
- Business entities created for post-career ventures
- Equipment and facility investments
Example
An NFL player buys a rental property for $3 million. For tax purposes, the structure (not the land) is depreciated over time, allowing annual deductions even if the property’s market value increases.
NBA
In the NBA, depreciation is commonly paired with high salaries to manage tax exposure at the top income brackets.
Players often use depreciation from real estate and business assets to smooth tax liabilities while maintaining liquidity and long-term asset growth.
Use Cases
- High-value real estate portfolios
- Media or production company assets
- Depreciation strategies paired with high salaries
Example
An NBA player earning $45 million annually uses depreciation from multiple properties to offset taxable income, lowering their effective tax burden without selling assets.
MLB
MLB players benefit from depreciation due to longer careers and more predictable income timelines.
Depreciation supports long-term planning by reducing annual tax burdens while players invest in facilities, equipment, and real estate that may appreciate over decades.
Use Cases
- Long career timelines favoring long-term tax planning
- Commercial real estate holdings
- Business equipment and facilities
Example
An MLB player invests in a training facility. The building and equipment are depreciated annually, reducing taxable income while the property itself gains market value.
NHL
For NHL players, depreciation often intersects with cross-border tax planning and business structuring.
Depreciating U.S.-based assets can help offset taxable income while navigating differences between U.S. and Canadian tax systems.
Use Cases
- Cross-border tax plannin
- Business depreciation inside holding companies
- Real estate assets in U.S. and Canada
Example
An NHL player operating a U.S.-based business depreciates equipment and improvements, offsetting U.S. income while maintaining long-term asset ownership.
MLS / International Soccer
In soccer, depreciation is frequently used within ownership, infrastructure, and real estate structures rather than player income.
It allows clubs and investors to manage tax obligations while the underlying assets that teams, facilities, or land will continue to rise in value.
Use Cases
- Club ownership stakes
- Real estate tied to training grounds or academies
- International tax structuring
Example
An MLS owner depreciates stadium-related assets while the franchise valuation continues to rise, creating a gap between tax treatment and market value.
Combat Sports
Combat sports athletes often face irregular income cycles, making depreciation especially valuable.
By depreciating gyms, equipment, and business build-outs, fighters can reduce tax exposure during peak earning years while reinvesting in long-term income sources.
Use Cases
- Gym ownership
- Promotional businesses
- Equipment-heavy operations
Example
A fighter opens a training facility and depreciates equipment and build-out costs, reducing taxable income during peak earning years.
Golf / Individual Sports
Individual athletes rely heavily on depreciation due to equipment-intensive operations and frequent real estate investments.
Depreciation helps align tax reporting with the high operating costs required to compete at elite levels.
Use Cases
- Private course ownership
- Equipment-intensive businesses
- Real estate and land improvements
Example
A golfer builds a private course and depreciates the clubhouse and equipment while the land itself appreciates significantly.
Racing / NASCAR / F1
In racing, depreciation is foundational due to the asset-heavy nature of teams and operations.
Vehicles, equipment, and facilities lose value on paper each year, allowing teams and drivers to reduce taxable income even as brand value and sponsorship revenue grow.
Use Cases
- Team equipment and vehicles
- Facilities and garages
- Charter or team ownership structures
Example
A racing team depreciates vehicles and equipment annually, even as the overall team valuation increases due to sponsorship and media growth.
Why Depreciation Matters
Depreciation allows athletes and owners to legally reduce taxable income without reducing cash flow.
It is one of the most powerful tools for high earners because it creates a disconnect between economic reality and tax reporting.
When paired with appreciating assets, depreciation can significantly accelerate long-term wealth accumulation.
Related Terms
- Appreciation
- Capital Gains
- Net Worth
- Gross vs Net Income
- Assets vs Liabilities
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