Do foreign NBA players pay taxes? Here’s how much nonresident tax the French superstar Victor Wembanyama could pay
by
J1 SummerTaxBack
June 29, 2023
⏱️ 7 minute read
🗂️ Nonresident taxes for global NBA stars don’t have to be a mystery 😌
If you’re an international athlete (or just an NBA fan), here’s a clear look at how U.S. taxes work for foreign players—and what that could mean for Victor Wembanyama in his rookie years.
What this article covers:
✅ How much a #1 NBA draft pick can earn (salary vs. endorsements)
✅ Do foreign NBA players pay U.S. taxes? (resident vs. nonresident rules)
✅ Federal tax, state tax, and the famous “jock tax”
✅ Why overseas players can be treated differently than U.S.-born players
✅ Central Withholding Agreements (CWA) and tax treaties—when they help
🏀 The money: rookie scale + endorsements
A top draft pick can earn multi-million dollar salary over the first four seasons under the NBA rookie scale, plus separate income from endorsements and licensing (NIL). Salary is typically treated as compensation for personal services; endorsements can be royalties/self-employment depending on the structure—each category may be taxed differently.
🌍 Resident vs. nonresident: why foreign players can be taxed differently
U.S. tax has two core statuses: resident and nonresident.
Residents: generally taxed on worldwide income.
Nonresidents (NRA): generally taxed on U.S.-source income (and certain income effectively connected with a U.S. trade or business).
A newly arrived star on, say, an O-1 visa could be a nonresident in the first calendar year if they don’t meet the Substantial Presence Test (SPT) (commonly, fewer than 183 “counted” days in the U.S. under the SPT formula). Whether media days, training camp, and season time push the player over the threshold determines the year-one status.
Why this matters: status drives which forms you file, which rates apply, and what planning is available (e.g., treaty claims vs. standard deductions).
💵 Federal tax on NBA salary (nonresident scenario)
For nonresidents, salary for games/services performed in the U.S. is U.S.-source and generally taxed at graduated rates if treated as effectively connected income (typical for wages). Some summaries refer to a 30% flat NRA rate—that generally applies to certain non-wage U.S.-source income without treaty reduction. For employee wages, withholding follows payroll rules; the final tax is determined on the nonresident return (Form 1040-NR).
Rule of thumb for high earners: federal tax can reach top brackets quickly on U.S.-source compensation.
🏠 State income tax and the “home team” advantage
State tax depends on where you live and work. Some NBA team states don’t impose state income tax (e.g., Texas, Florida, Tennessee). That can reduce the home-game state tax burden—but it doesn’t end the story…
🧾 The “jock tax” (duty days across the map)
Athletes often owe tax in many states where they perform services (play games, practice). Most states and some cities assess tax on a duty-days or games-played allocation. A Texas-based player, for example, may owe no Texas income tax on home games but will still owe tax to most away-game states/cities. A handful of states don’t impose jock tax; many do.
Result: elite players typically file multiple state (and city) returns each year.
🤝 Central Withholding Agreement (CWA): why it matters for foreign stars
A CWA is an agreement with the IRS—often used by nonresident athletes/entertainers—allowing customized withholding based on projected income and deductible expenses.
Benefits can include:
More accurate, cash-flow-friendly withholding (instead of blunt 30% non-wage withholding rules where applicable).
Coordinating wage vs. non-wage income and deductions linked to performances.
Reducing surprise balances due at filing time.
Note: CWAs typically don’t cover passive income (e.g., dividends/royalties); for those, tax treaties might still help.
🧑⚖️ Tax treaties: when do they help?
The U.S. has dozens of income tax treaties. Some have athlete/entertainer articles that exempt U.S.-source income only up to low thresholds (often $10k–$20k). For top NBA salaries, those thresholds are quickly exceeded—so treaty relief on salary is usually limited.
Treaties can still matter for non-wage items (e.g., certain royalties/interest/dividends), depending on the specific treaty.
📝 Filing obligations for NBA players
Federal: Form 1040-NR if nonresident (or Form 1040 if resident), plus info statements for endorsement structures where applicable.
State/City: multiple returns based on duty-day/game allocations.
Forms from teams/brands: W-2 for wages; 1099/1042-S possible for certain non-wage/treaty-exempt amounts.
📌 Quick takeaways for a foreign NBA rookie
First-year status drives everything: track days for SPT and plan accordingly.
Expect federal top brackets on U.S.-source wages; endorsements may be taxed differently.
No home-state tax doesn’t eliminate jock tax elsewhere.
A CWA can smooth withholding for nonresident seasons.
Treaty relief for high NBA salaries is usually limited—but can still help for non-wage items.
Prepare for many state filings and keep meticulous duty-day records.
💻 Need help (like the pros)?
J1 SummerTaxBack helps nonresidents—from students to pro athletes—navigate residency, withholding, CWA/treaty strategy, and multi-state filings.
File the right forms, at the right time, for the maximum legal savings.