LeBron James: Income Tax Genius?

Florida has no state income tax. See what James would have paid in New York, Chicago, or Cleveland.

Personal Income Taxes

Tax Rate Range:
flat rate of 3% of federal adjusted gross income
Personal Exemptions: single-$2,000; married-$4,000; dependents-$2,000
Standard Deduction: none
Medical/Dental Deduction: health insurance and long-term care insurance premiums are deductible
Federal Income Tax Deduction: none
Retirement Income Taxes: Illinois does not tax distributions received from qualified employee benefit plans, including 401(k) plans; an Individual Retirement Account, (IRA) or a self-employee retirement plan; a traditional IRA that has been converted to a Roth IRA; the redemption of U.S. retirement bonds; state and local government deferred compensation plans; a government retirement or government disability plan, including military plans; railroad retirement income; retirement payments to retired partners; a lump sum distribution of appreciated employer securities; and the federally taxed portion of Social Security benefits.

Personal Income Taxes

Tax Rate Range: low-0.587%; high-5.925%
Income Brackets: lowest-$5,000; highest-$200,000; several cities in Ohio levy municipal income taxes
Number of Brackets: 9
Personal Exemptions: * single-$1,500; married-$3,000; dependents-$1,500
Standard Deduction: none
Medical/Dental Deduction: unreimbursed medical/dental expenses, premiums for long-term care insurance, and unsubsidized health insurance premiums are deductible
Federal Income Tax Deduction: none

Personal Income Taxes

Tax Rate Range: low-4.0%; high-8.97%. The state has enacted two new temporary income tax rates in its 2010 budget levied on the highest-income filers.  For households with taxable income above $500,000, regardless of filing status, the tax rate rises to 8.97 % from 6.85%; for those with taxable income below $500,000 but above $200,000 for single individuals, $250,000 for heads of households, and $300,000 for married couples filing joint returns, the rate increases to 7.85% from 6.85%.
Income Brackets: *lowest-$8,000; highest-$500,000
Number of Brackets: 5
Personal Exemptions: single-$0; married-$0; dependents-$1,000
Standard Deduction: single-$7,500; married filing jointly-$15,000
Medical/Dental Deduction: federal amount
Federal Income Tax Deduction: none

Personal Income Taxes
No state income tax. ZERO.

Source: http://retirementliving.com/RLtaxes.html

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  • Maurice Coles

    If LeBron is a republican, as I suspect he is this is a very good deal for him. He gets a great opportunity to win an NBA ring and save money in the process. Who can argue with that? Although, I’m sure we will find some people from Ohio that will turn coat and say he deserted them. How about he made a good business decision.

    • Maurice, I agree that LeBron made a smart business decision as well as a thoughtful one for his career. But why would you assume that he is a republican? Surely, you aren’t jumping to that conclusion based on the assumption that because he is rich, he must be with the GOP. There are too many millionaire democrats and independents to make that assumption.

      According to the Wikipedia entry on James (http://en.wikipedia.org/wiki/LeBron_James), in June 2008, he donated $20,000 to a committee to elect Barack Obama. On October 29, 2008, James gathered almost 20,000 people at the Quicken Loans Arena for a viewing of Democratic presidential nominee Barack Obama’s 30-minute American Stories, American Solutions television advertisement. It was shown on a large screen above the stage, where Jay-Z later held a free concert.

      This doesn’t necessarily mean that he is a democrat, either. But there is far less to indicate that he is republican.

  • Michael Alston

    Dale, Your article just recited each state’s tax rates So what would The King’s tax bill (in $) have been in each city? … What’s a comparison without a bottom line??

  • Otto

    Just to clarify, James only gets the benefit of the no state income tax on half his games. He still has to pay taxes in the states he plays away games in. This effectively cuts in half the monetary benefits of playing in Miami. The benefit is still large, but not as drastic as you’d think. And also remember that money from his endorsement deals will be taxed according to the state where that company that’s paying him is from. I think the writer here left out these important details. There’s still a monetary benefit, it’s just quite a bit smaller than you’d think at first.

    • Otto, you make some great points. However, the fact he has to pay taxes on income earned from away games is true for any city he plays in, so it doesn’t cut the monetary benefits (as relates to income taxes) of playing in Miami in comparison to the other cities. The same would apply for taxes on endorsement deals; it would be the same no matter what city he played in.

      • Dink Singer

        Most, if not all, states give residents a dollar for dollar tax-credit for taxes paid to other jurisdictions on income earned there.  For example, if Mr. James was a legal resident of Ohio in 2009, he had to pay the full Ohio tax on the income from home games and games played in Florida,  paid nothing to Ohio on games played in New York and paid the difference between the full Ohio tax and the Illinois tax for the games played in Chicago.

        LeBron could have fairly easily established a Florida (or Nevada) residency while still playing for the Cavs.  In that case, the additional income tax he would have paid if he stayed with Cleveland instead of joining the Heat would be on only the half of his salary attributable to home games. 

        • Dirk;

          Another great point. It underscores that what ever the tax implications of James’ decision, it was probably only secondary to his desire to join a franchise he believed would have the best chance of making a successful championship run.

  • I think all of you have made valid points, maybe except for the republican statement. In all, my desire for this article was to highlight the bigger picture of weighing all your options. I believe LeBron James chose to go to Miami because it was his best chance at a championship. I do believe that a good company, in this example the Miami Heat definitely notified James of the tax breakdown, James definitely saw this as a perk, secondary to his main objective.

  • I don’t think taxes played a role in his decision. First, NBA players pay taxes to all the jurisdictions in which they play away games. So the tax advantage is smaller than you think. Second, just because you don’t pay an income tax doesn’t mean the state can’t get their money from you. Property taxes, luxury taxes, consumption taxes all play a role in decreasing the overall tax advantage achieved by playing in one jurisdiction over another. And lastly, a good accountant can structure the size, timing, form and jurisdiction of compensation so as to minimize taxes, irrespective of place of residence. Assuming his compensation from endorsements and other marketing deals matches or exceeds the amount he makes from playing the game, taxes are the least of his issues.

    Overall, the article comes from the perspective of a wealth-builder, one who tries to maximize the value of transactions; this often comes at the expense of a vision, a value statement or a relationship. Instead, Black Enterprise should take a longer term and more broader view by focusing on value-creation. Problem solving, innovation, creativity and entrepreneurship are the four horsemen of growth for black people. By focusing on financial engineering and tax planning, you place too emphasis on topics that don’t matter at the expense of topics that create long term sustainable opportunities for your readers. #imjustsayin

  • To Mr. Mazard,

    I hear what you’re saying completely, again, this piece was about a potential employee weighing his options. I believe I stated and gave his PR company credit for the job they did during the whole situation. By no means do I believe Mr. James took his talents to Miami strictly for tax purposes, but it doesn’t hurt. At Black Enterprise we try to give the broad, detailed, and sometimes colorful perspective of business. I think besides the way in which he delivered his news of heading to Miami, everything else was done in classy manner. It’s very plausible that we’ll produce something on the Four Horsemen in the future. I appreciate your insight.

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