Professional athletes in the United States file income tax returns in every state and city where they play on the road. The nickname: the "jock tax." A player's salary is apportioned by working days, and it is not unusual for one player to file returns in around 20 states and cities in a single season. Then, in December 2023, Shohei Ohtani's 10-year, 700 million dollar (about 105 billion yen) contract with the Dodgers — designed to defer 680 million dollars, 97% of the total, until 2034 and later — grew into a controversy in which California's State Controller issued a statement urging Congress to "cap deferred compensation." From the mechanism that taxes you just for showing up to a game, to the cross-state battle over "deferrals," to how it differs from Japan's withholding on foreign athletes who play here, we sort it all out from primary sources.
How it works: slicing a salary by "duty days," state by state
The jock tax is not the official name of any tax. Most U.S. states levy state income tax on nonresidents' "income earned from work performed in the state," and the jock tax is the nickname for applying that rule strictly to professional athletes who travel constantly. The basic calculation is an apportionment known as the "duty days" method.
- Count the "duty days" from the first day of training camp to the last game of the season (not just games — practices, meetings and travel days count too)
- Of those, count the duty days spent in each state or city
- Salary × (duty days in that state ÷ total duty days) becomes taxable in that state
Illustrative calculation (a fictional player)
A player with a 3 billion yen salary and 200 duty days a year spends 10 days in California on road trips:
3 billion yen × 10 days ÷ 200 days = 150 million yen taxable in California. For a salary high enough to hit the state's top rate of 13.3%, that road trip alone works out to up to about 20 million yen in state tax.
- It is not only states that tax. Cities such as Philadelphia and Cleveland levy their own municipal income taxes on nonresident players
- The player reports all income in the home (resident) state, then credits the taxes paid in road-trip states against the home state's tax — a mechanism that adjusts for double taxation
- It does not stop at players: the coaches and trainers who travel with the team are covered too. Team staff who travel a lot face the same problem
Why it exists: it started with Michael Jordan in 1991
The widely cited trigger is the 1991 NBA Finals. When Michael Jordan's Chicago Bulls beat the Lakers in Los Angeles to win the title, California applied its state income tax to Jordan and the other visiting players as "income earned in the state."
Illinois, the players' home state, pushed back by immediately passing a retaliatory law: "if your state taxes our players, we will tax yours." The law is nicknamed "Michael Jordan's Revenge," and from then on, states and cities with professional teams took up the same kind of taxation one after another. Wealthy nonresident athletes are not voters in the taxing state, which, it has been pointed out, made them politically easy targets.
As the tax spread, fights broke out over how to apportion. Cleveland, Ohio used its own method based on "games played" rather than duty days, but in 2015 the Ohio Supreme Court struck it down as unconstitutional, ruling that it taxed work performed outside the city in violation of due process. In that case, an NFL player who spent two days a year in the city was being taxed by the city on 5% of his salary under the games-played method (about 1.25% under the duty-days method). Since then, the duty-days method has become the established standard.
The result: California's 13.3% and the "102 billion yen deferral" controversy
A frequently cited consequence of the jock tax is that "your take-home pay depends on which state's team you sign with." Home games account for most of a player's duty days, so the home state's tax rate has by far the biggest impact.
| State | Top individual income tax rate | Notable home teams |
|---|---|---|
| California | 13.3% (12.3% + 1% on income over 1 million dollars). Wages also carry an uncapped 1.3% state disability insurance premium (2026) | Dodgers, Padres and others |
| New York | 10.9% (New York City adds its own city tax) | Yankees, Mets and others |
| Florida, Texas, Nevada, Washington, Tennessee | 0% (no state individual income tax) | Rays, Rangers, Mariners and others |
What made this "state gap" famous in one stroke was Shohei Ohtani's contract. Of the 10-year, 700 million dollar total, 680 million dollars (about 102 billion yen) is deferred and paid 68 million dollars a year from 2034 to 2043, after the contract ends, keeping his salary during the contract at 2 million dollars a year. The club and the player explain the design as a way to hold down the luxury tax (competitive balance tax) calculation and preserve the team's budget for reinforcements; deferrals themselves are lawful contracts permitted under MLB's collective bargaining agreement.
The controversy is about state tax. Federal law (Public Law 104-95 of 1996, codified at 4 U.S.C. §114) provides that certain retirement compensation "paid in substantially equal installments over at least 10 years" cannot be taxed by a state where the recipient no longer lives at the time of payment. In other words, if Ohtani is not a California resident when he receives the deferred payments from 2034 onward — for example, if he has returned to Japan — the state quite possibly cannot tax this enormous compensation.
- In January 2024, California State Controller Malia Cohen issued a statement urging Congress to set a cap on deferred compensation, saying the current system "allows unlimited deferrals for those in the highest tax brackets." The California Center for Jobs and the Economy, a private think tank, estimated the state could lose up to about 98 million dollars (about 14.7 billion yen) in tax revenue, a figure Cohen also cited
- In April 2024, the State Senate passed SJR14, a resolution urging Congress to revisit the system, by 32 to 6 — but it was never taken up in the Assembly and died in November of that year. As of August 2026, the federal law has not changed either
- Note that this is not a story of "Ohtani evading taxes." Federal income tax is levied when the money is received, and what happens with state tax depends on still-undetermined factors such as where he lives a decade from now. The criticism is aimed not at the player but at the design of a federal law that allows unlimited deferrals
Comparison with Japan: no road-game taxation — but 20.42% on games played here
Japan has no jock tax. National income tax is uniform nationwide, and local resident tax is levied in one place by the municipality where you live on January 1, at a standard rate of 10% that is virtually the same everywhere. Whether a player's games are mostly in Fukuoka or mostly in Sapporo makes no difference to their tax bill. It is a major difference from the United States — rooted in the presence or absence of federalism — where every state has its own rates and its own returns.
On the other hand, when an athlete comes from abroad and plays in Japan, Japan too applies the principle that "the country where the services are performed gets to tax."
| United States (jock tax) | Japan (taxation of nonresidents) | |
|---|---|---|
| Taxing unit | Each state and city (can mean dozens of returns) | The nation, in one place |
| Calculation | Salary apportioned by duty days | Compensation for services performed in Japan is Japan-source income |
| Collection | Returns filed state by state (clubs also withhold state tax) | In principle settled by 20.42% withholding at source at the time of payment (including the special reconstruction income tax) |
| Treaty exceptions | State taxes are outside the scope of tax treaties | Article 16 of the Japan-U.S. tax treaty: exempt if annual gross receipts are 10,000 U.S. dollars or less; taxable above that (the short-stay exemption does not apply to professional athletes) |
- As when the Dodgers and Cubs opened the season at Tokyo Dome in March 2025, when MLB regular-season games are held in Japan, the pay attributable to those games can be Japan-source income for U.S.-resident players. Entertainers, musicians and professional athletes receive special treatment under most tax treaties — "the place of performance may tax" — and cannot use the short-stay exemption (the 183-day rule) that applies to ordinary business travelers
- Foreign players joining Japanese professional baseball are likewise taxed at a flat 20.42% withholding on pay for their nonresident period until they become residents of Japan; once resident, they switch to the same progressive taxation as Japanese players
- In short, the idea that "the place where a visiting player earns gets to tax those earnings" is common to Japan and the U.S. — America simply carries it through at the level of states and cities
Where this touches you: earn abroad, get taxed there, adjust at home
The jock tax itself is a U.S. institution, but the principle of "being taxed by the country or state where you earned" concerns not just athletes but everyone from Japan who earns fees or prize money abroad.
- Japanese major leaguers mostly become U.S. tax residents and, on top of federal tax, file jock-tax returns in each state and city they visit. This is why the gap between a contract's face value and take-home pay is so large — and why a no-tax-state team versus California changes the deal
- Japan residents who win prize money at overseas events in golf, tennis, esports and the like are first withheld locally, then report the income as worldwide income on their Japanese tax return and adjust the double taxation through the foreign tax credit. Always keep the documents proving the tax withheld locally
- It may look like a world of enormous salaries, but the logic of apportionment and marginal rates connects directly to everyday taxes. How your burden changes as income rises under Japan's progressive taxation is covered in our article on taxes at 10 million yen of income, and Japan's own rules on how residence determines taxation are laid out in our article on wealthy foreigners moving to Japan and taxes
- And the pattern of changing the timing and place of taxation by "receiving compensation later" echoes Japan's own retirement allowance tax rules (separate taxation with a large deduction at the time of receipt). Tax systems reacting strongly to "when and where you receive" is common to both countries
What to do today
What to do today
- If you have earned (or expect to earn) fees or prize money at overseas events or engagements, keep the documents proving the amounts withheld locally, and check whether you need the foreign tax credit on your Japanese tax return
- Look up your own marginal tax rate (how much your tax rises if income goes up by 10,000 yen) on your withholding slip or resident tax notice. Comparing it with California's 13.3% makes the story concrete
- If you spend long periods on overseas business trips or working remotely abroad, confirm with your employer the conditions for not being taxed by the host country (the tax-treaty short-stay exemption, the 183-day rule)
FAQ
Q. Is "jock tax" the official name of a tax?
A. No, it is a nickname. It refers to the taxation that most U.S. states and some cities impose on "income nonresidents earn from work performed in the state," applied to professional athletes who travel constantly. The standard is the "duty days" method: the salary is apportioned by working days from training camp to the final game, and the days spent in each state become taxable there.
Q. Is Shohei Ohtani evading taxes?
A. No. The deferral contract is lawful and permitted under MLB's collective bargaining agreement, and is explained as a way to preserve the club's budget for reinforcements. Federal income tax is levied when the money is received. The controversy is a system-design issue: under a 1996 federal law, compensation "paid in substantially equal installments over at least 10 years" cannot be taxed by a state where the recipient no longer lives, so depending on his future residence, California's tax revenue could fall. The criticism is aimed at the federal law, not at the player.
Q. Does Japan have anything like the jock tax?
A. There is no road-game taxation with rates differing by prefecture. Resident tax is levied in one place by where you live on January 1, at a standard 10% that is virtually uniform nationwide. But Japan does apply the principle that "the country where the services are performed gets to tax": pay that a foreign-resident athlete earns from games played in Japan can be Japan-source income, subject to 20.42% withholding at the time of payment.
Q. What happens when a Japanese person wins prize money at an overseas event?
A. If you are a resident of Japan, the host country withholds tax first, and you then report the income as worldwide income on your Japanese tax return. The tax paid locally can generally be adjusted through the foreign tax credit, but the credit requires documents proving the local tax payment. For individual decisions, consult a tax office or a tax accountant.
References (sources)
* Figures are based on materials and reporting published as of August 2026. Yen conversions use an approximate rate of 1 dollar = 150 yen. This article introduces the U.S. tax system and a reported controversy for informational purposes; it does not state any individual's tax liability, nor is it intended as criticism of any individual or organization. For individual tax decisions, consult a tax office or tax accountant.