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Thursday, October 23, 2014

Phil Mickelson incurs 61% tax rate after winning British Open

Phil-Mickelson-Claret-JugPhil Mickelson made headlines earlier this year when he ranted about his astronomically high tax rate in the state of California. While no one wants to hear one of the wealthiest athletes in the world complain about money, I can see how the tax rate he incurred after winning The Open Championship might be a bit frustrating.

The week before he won his first Open Championship, Mickelson also won the Scottish Open. Between the two tournaments, he earned $2,167,500. Not bad for two weeks of work, but the 43-year-old will take home well under half of the earnings.

As Forbes pointed out, the United Kingdom has set Scotland’s tax rate at 45% for people who make over 150,000 pounds ($230,000 US), meaning Mickelson had to leave $954,000 of his winnings in Scotland before he left. In addition to that 45%, the UK also taxes the endorsement income of non-resident athletes. Mickelson will be taxed for any bonuses he receives for winning the tournaments in addition to ranking bonuses he receives at the end of the year. Those taxes will be 45% as well.

Forbes went on to note that Mickelson can take a foreign tax credit on his 2013 US return so he is not taxed twice at the federal level for the money he earned overseas. However, he will still have to pay a 2.9% unemployment tax and 13.3% tax for the state of California. All of that math adds up to a 61.12% tax on everything he earned while dominating in Scotland. Of the $2,167,500 he earned, Mickelson will take home about $842,700 before expenses (which include paying his caddie).

Is Phil hurting for money? Hardly, but I guarantee you 99 out of 100 people who were in his position and being taxed over 60% would whine about it. As regular middle-class citizens, we just don’t want to hear it.



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