Six-hundred and seventy days.
That’s how long it will have been since the Toronto Blue Jays last played at home, when they finally take the field at the Rogers Centre on July 30.
During that time, our favourite major league franchise played their “home” games in Tampa and Dunedin, Florida, and Buffalo, New York. My passion for all things baseball and Blue Jays makes me excited to see them return to Toronto; my passion for all things tax piques my interest in the unique tax circumstance that Blue Jays players face this season, after all those home-away-from home games.
Recall that Canadian tax rules state that a non-resident athlete employed by a Canadian team is taxable in Canada for the duties they perform here – the games and practices that take place north of the border. Most, if not all, Blue Jays players do not obtain Canadian residency status. As such, they do not pay Canadian taxes on income earned outside of Canada – in a typical year, that means road games and spring training.
With spring training in Dunedin and road games only in the U.S., Jays players usually perform about 40 per cent of their duties in Canada. But COVID-19 upended that, as so much else. The Canada-United States border has been closed since March 2020, and that combined with cases surging for much of that time on both sides of it, it was not practical or possible for the team to play at home. But now, a National Interest Exemption has been approved by the Canadian government, allowing the Blue Jays to return.
The Jays played their first 21 “home” games of the 2021 MLB season in Florida and the next 23 in Buffalo, leaving 37 home games to be played at the Rogers Centre – 45 per cent of their remaining home schedule. That means a drop in Canadian duty days so only approximately 20 per cent of their earnings would be taxable here.
What does this mean for the players?
The top combined Canadian federal and Ontario provincial income tax rates presently sit at 53.5 per cent. U.S. federal income tax rates have a top rate of 37 per cent – but then add state tax amounts (different in each state) to determine the effective difference between Canadian and U.S. tax rates. New York state is a high-tax jurisdiction. Historically, New York state tax topped out at 8.82 per cent, until 2021, when higher brackets were introduced that will include the likes of professional baseball players. The ultra-superstars of Major League Baseball might pay a state tax rate of 10.9 per cent, with the next bracket below paying 10.3 per cent. Then there’s Florida, which has no state tax. Thus, the top tax rates in New York and Florida are 47.9 and 37 per cent, respectively.
That means a savings to the players for every game they didn’t play in Toronto that they played in Florida or New York instead.
Like the Canadian tax system, the U.S. tax system computes tax on a marginal basis, meaning the more you make the higher the tax rate on that incremental income. For a player like George Springer, the top earning Blue Jay, we figured his Canadian tax per home game in a normal season to be approximately $57,000 (USD). But, if those games were in Florida his tax would be only $40,000 (USD) and if they were in Buffalo the tax would be $51,000 (USD), per game. Every game the Blue Jays played outside of Toronto represented a tax savings for Springer. Conversely, all-star players who are still on rookie contracts, like Vladimir Guerrero Jr. and Bo Bichette, will only see negligible differences in their take-home pay. Guerrero would pay approximately $1,150 (USD) of tax per Toronto game, compared to $900 (USD) per Florida game and $1,100 (USD) per Buffalo game. So, the size of the hit to a player’s wallet depends on where he falls on the pay scale.[1]
To a man, Blue Jays players have expressed their excitement about coming back to Toronto. A temporary home and nomadic existence are likely no replacement to the comforts of a home stadium and true hometown fans cheering them on. Fans, too, are excited to have some normalcy in their lives with their boys of summer back in town. The baseball hits are coming these days to this young, talented, flashy team on the rise; returning home means a bit of a tax hit, but we suspect players won’t mind too much amidst all the excitement.
This article has been prepared for the general information of our clients. Specific professional advice should be obtained prior to the implementation of any suggestion contained in this article. Please note that this publication should not be considered a substitute for personalized tax advice related to your particular situation.
[1] Figures are illustrative only, based on players’ published salaries and current tax rates, and do not factor in additional complexities of individuals’ situations as pertaining to U.S. and Canadian tax codes.
