Taxes and tax returns, you’ve probably heard about it at school or during dinner with your parents. Most future student-athletes have never done anything with it, and no blame for that! In your home country you simply file a tax return on the income you have earned that year and you will receive a timely notification from the tax authorities. But what are the rules for student-athletes in the USA? We will tell you more about this below!
As a Student-Athlete Company, we obviously do not know all the intricacies of taxation, but we have found a solution for that: DB Tax Advisory! DB Tax Advisory is one of our partners and provides tax advice to athletes within the Dutch Eredivisie, Premier League and the ATP Tour. And since recently, Slamstox student-athletes also belong to that list, cool right? But also very important. Many student-athletes have to file a tax return on their scholarship. In addition, filing a tax return earns a student athlete an average of $750 to $1,500 in tax refunds.
The USA has different ‘tax systems’ at the Federal, State and Local levels. Most states, apart from the federal government’s tax office (IRS), also ask for income tax. This means that tax systems differ per state. Quite complicated, isn’t it? Especially with all those different systems and rules? This can sometimes complicate your tax return. But no worries, help is here! DB Tax Advisory has outlined four general, but important, aspects of the US federal tax system for student-athletes:
- A scholarship can consist of a qualified (including tuition fees, books) and non-qualified (including room and board) part;
- The qualified part of a scholarship is not subject to tax and cannot be reported;
- The non-qualified part of the scholarship is subject to 14% tax (“income tax”) and is therefore reportable;
- Taxation can be reduced to 0% by exempting in advance or reclaiming it afterwards. Exemption is done by submitting (in advance) a form intended for this purpose to the payer of the scholarship (educational institution). The excess tax withheld is reclaimed by submitting a tax return (“income tax return”) after the end of the tax year;
Do you feel like this is all still a bit complicated? Don’t worry. Florian Niesten, an athlete and tax adviser, works within the DB Tax Advisory team. Florian played field hockey at the highest level in the Netherlands and has a lot of experience with running ultra-marathons, he even ran the ‘Marathon des Sables’. For those who have not heard of it before: it is a six-day race of 254 km through the desert of Morocco. Whut ?! Yes, Florian is a hard-working champ as you all are!
Florian provides various professional athletes with tax advice and is now happy to work with student-athletes in the USA and with athletes who are at the start of their (professional) career. Do you have questions about this subject and would you like to receive advice from Florian? Click here!
Do you have another question about anything else related to student athletes or scholarships? Reach out! We will help you.