Why You Need to Care About Taxes
Most athletes don't deal with taxes. Either the club handles it for them, or nobody does. And both are a problem.
When the club handles it, you don't understand what's happening with your money. You don't know how much you're paying. You don't know if it's right. You don't know if you could be paying less.
And when nobody handles it? One day you wake up with a letter from the tax authority. And that letter won't be pleasant.
I know athletes who lost tens of thousands because they didn't file their tax return on time. Or because they didn't use deductions they were entitled to. That's money they could have kept. Instead, the government has it.
Self-Employment vs. Employee Status
This is the fundamental question every athlete faces. And the answer depends on your situation.
Employee Status
Some clubs hire you on an employment contract. That means they withhold income tax, social security, and health insurance directly from your paycheck. You don't have to deal with anything. The club does it for you.
Advantages: Simplicity. You don't have to file a tax return (if you have no other income). You're entitled to sick leave, vacation, and other employee benefits.
Disadvantages: Less flexibility. You can't deduct expenses related to sports (equipment, travel, supplements). And total contributions are higher because the employer pays additional insurance on your behalf.
Self-Employment
Most athletes operate as self-employed. That means you're a freelancer. You invoice the club for your services. You handle taxes yourself.
Advantages: You can deduct expenses. You can use flat-rate expenses (a percentage of income). You have more control over your finances.
Disadvantages: You must file a tax return. You must pay advance payments for social security and health insurance. You must keep track of your income and expenses.
Watch out for misclassification.
If you play for one club, train according to their schedule, wear their jersey, and they tell you where and when to be - but you invoice as self-employed - that could be considered employment misclassification. Tax authorities check for this, and the penalties are steep.
Combination
Some athletes have employment at a club and additional self-employment income - from personal training, brand partnerships, or speaking engagements. In that case, you must file a tax return reporting both.
Flat-Rate vs. Actual Expenses
If you're self-employed, you have two options for claiming expenses.
Flat-Rate Expenses
You don't need to collect receipts. The government automatically recognizes a percentage of your income as expenses (typically 40-60% depending on jurisdiction). That means you only pay taxes on the remaining portion of your income.
Example: You earn $60,000 per year. Flat-rate expenses = $24,000. You pay taxes on $36,000. Simple. No receipts. No documentation.
Actual Expenses
If you have high costs related to sports, it might be worth claiming actual expenses. That means deducting real costs - equipment, supplements, travel, recovery, coaching, physiotherapy.
Example: You earn $60,000. Actual expenses $35,000 (new skates $1,500, gear $4,000, travel to games $8,000, coach $6,000, supplements $3,000, physiotherapy $4,500, ice rental $5,000, other $3,000). You pay taxes on $25,000.
The difference can be significant. But watch out - you must have documentation for everything. Every receipt. Every invoice. And you must keep proper records. That's extra work. That's why most athletes who go the actual expenses route have an accountant.
How to figure out which is better for you?
Add up your actual sports expenses. If they're higher than the flat-rate percentage of your income, go with actual expenses. If not, stick with the flat rate. Simple math.
What You Can Deduct
If you go the actual expenses route, here's a list of things you can deduct. But remember - they must be related to your sport and you must have documentation.
Sports Equipment
Skates, cleats, rackets, helmets, pads, jerseys, training gear. Everything you need to practice your sport.
Travel
Trips to games, tournaments, training camps. If you drive your own car, you can claim mileage. If you take a train or fly, you need the ticket.
Health and Recovery
Physiotherapy, massage, rehabilitation, sports doctor. Supplements and sports nutrition (if demonstrably connected to your athletic activity).
Coaching and Development
Personal trainer, conditioning coach, mental coach. Educational courses and certifications related to sports. Facility rental (ice time, gym, court).
Marketing and Representation
Professional photos, website creation, social media management. Agent fees (commission from contracts).
Most Common Tax Mistakes Athletes Make
1. Not Filing Your Tax Return
There's a deadline. Miss it, and you pay penalties for every day you're late. I know hockey players who didn't file for 3 years in a row. The tax authority assessed their taxes and added penalties. Result? A debt over $10,000. For nothing. Just for being careless.
2. Not Using Deductions
Many athletes pay unnecessarily high taxes because they don't use deductions they're entitled to. Mortgage interest, retirement contributions, life insurance, charitable donations - all of these reduce your tax base.
3. Missing Documentation
You buy new cleats for $500 and throw away the receipt. You pay the physiotherapist $200 and have no proof. By year-end, you're missing documentation for thousands of dollars in deductible expenses.
The solution is simple. Photograph your receipts on your phone. Immediately. On the spot. Save them in a "Taxes" folder. At year-end, send them to your accountant. Done.
4. Incorrectly Set Advance Payments
Advance payments for social security and health insurance are calculated from last year's income. If you had high income last year and lower this year, you're paying high advances you can't afford. Conversely, if income jumped up, you might face a large payment at year-end.
Monitor it. Or have your accountant monitor it.
5. Ignoring Foreign Income
Player compensation, bonuses, prize money from foreign tournaments - all of this must be declared. Even if it was already taxed abroad. Most countries have treaties to prevent double taxation, but you must report it correctly.
Golden rule: Photograph receipts. Immediately. Always.
You don't need to file them in binders. A photo on your phone is enough. But you must have them. Because without documentation, no deduction.
How to Find the Right Accountant
Not every accountant understands athletes. You need someone who knows how the sports environment works, which expenses are legitimate, and how to optimize an athlete's taxes.
What to Look For
- Experience with self-employed individuals - not large corporations, but individual freelancers
- Experience with athletes or performers (similar tax situations)
- Communication - responds within 48 hours, explains things in plain language
- Price - monthly accounting for a self-employed individual costs $100-300. A one-time tax return costs $200-500
Where to Look
Ask your teammates. Who does their taxes? Are they happy? Most good accountants work on referrals. You can also ask your agent or club - they often have contacts for accountants who specialize in athletes.
Cost vs. Savings
An accountant costs you $1,500-3,000 per year. But if they properly set up your deductions and optimize your taxes, they'll save you $3,000-8,000 per year. That's an investment, not a cost.
Practical Tips to Wrap Up
Open a Separate Account
Have one account for personal expenses and one for business. Your business account receives income from the club, and from it you pay sports expenses, insurance advances, and taxes. Clarity is everything.
Set Aside Money for Taxes
Every month, put aside 20-25% of your income into a separate savings account. When it's time to pay taxes and insurance payments, you'll have the money. You won't be scrambling to find it.
Handle It Continuously
Don't deal with taxes once a year in March. Handle them continuously. Photograph receipts immediately. Do your reviews quarterly. Contact your accountant regularly. This prevents stress and mistakes.
Think Ahead
An athlete's income fluctuates. One season you earn $80,000, the next $40,000. But advance payments are calculated from last year. If you expect a drop in income, request lower advance payments. Conversely, if you expect an increase, prepare for higher end-of-year payments.
What to Take Away
Taxes aren't complicated. They're unpleasant. But when you handle them correctly, you save money. And the money you save, you can invest in your development during your career.
Thanks to sports, you have discipline. Use it here too. Set up a system - photograph receipts, set aside money for taxes, talk to your accountant once a quarter. That's it. No rocket science.
And if you were telling yourself that taxes can wait - they can't. The tax authority will remember you. And it'll cost more than if you'd handled it right now.
The Mental Edge: 25 Mental Techniques for Athletes
Finance and sports have one thing in common - you need a clear head. Learn techniques that help.
Learn more →If you're interested in how to earn money during your career, check out 5 Ways to Earn Money as an Athlete. And if you're dealing with housing and mortgages, take a look at Housing for Athletes.
Tip: If you want to learn how to work with your mind and handle pressure, check out the e-book The Mental Edge: 25 Mental Techniques for Athletes.