Explaining the taxability of professional athletes
Nonresident professional athletes must use the “duty days” method to determine their Michigan income tax obligations.
Personal Service Income
Income tax is calculated by multiplying the athlete’s personal service income by a fraction. The numerator is the total Michigan duty days, and the denominator is the athlete’s total duty days. Personal service income typically includes salary during the regular playing season, guaranteed payments, certain bonuses, deferred compensation, and other performance-based earnings. However, it excludes strike benefits, severance pay, contract buyouts, and similar payments not directly tied to player services.
Duty Days
Total duty days encompass any day when the athlete must perform services for their team under the terms of their contract. This includes game days, preseason training camps, team meetings, promotional activities after the season, disabled list days, travel days (regardless of activities conducted during travel), and mandatory off-season workouts at team facilities.
Michigan duty days specifically refer to the days a player spends within Michigan performing services required by their contract. It excludes travel days without team activities and days on the disabled list.
Duty Days Method
Athletes are exempt from Michigan tax under the duty days method if their state of residence has a reciprocal agreement with Michigan. Athletes playing for multiple teams must calculate total duty days and Michigan duty days separately for each team contract.
Revenue Administrative Bulletin 2018-27, Michigan Department of Treasury, December 17, 2018.