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Reply to "2020 High School players signing as Undrafted Free Agents"

There haven't been any federal "luxury" taxes in a long time. There could be something at the state level.

The top federal bracket is currently 37%. A kid with a $1M signing bonus spread over 2 years will be close to that. When you add state and local taxes that tuition reimbursement could easily be taxes at 40% for the top tax bracket guys. Even at the $200K level you're talking about 32% federal. Not chump change when you're trying to stretch that bonus over multiple years.

Note, though, that it's a graduated tax bracket. For your $200K example, only $39,275 will be taxed at 32% and, even then, that's ONLY if we're talking $200k AFTER deductions.

Let's break down a $200K salary for a single guy:

Gross:  $200,000

Single std. deduction: $12,200.

Let's pretend he has ZERO other deductions or tax credits. We have a taxable income of $187,800

The first $9,700 is taxed at 10% ($970)

The next $29,774 at 12% ($3,572.88)

The next $44,724 at 22% ($9,839.28)

The next $76,524 at 24% ($18,365.76)

The remaining $39,274 at 32% ($12,567.68)

For a total tax burden of $45,315.61, an effective tax rate of 22.66%

This assumes absolutely no deductions or credits whatsoever, which is highly unlikely. 

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