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Are NFL Fines Tax Deductible?

Written by Nickel - 13 Comments

If you’re an NFL football fan, then you’re likely aware that there were a number of (literally) mind-numbing hits on wide receivers this past weekend. These included vicious hits by Pittsburgh’s James Harrison, Atlanta’s Dunta Robinson, and New England’s Brandon Merriweather.

In case you missed them, here are some links to video clips on YouTube:

Merriweather and Robinson got fined $50k each, whereas Harrison got fined $75k for his actions. Whether or not you agree with these fines, I think that we can all agree that they present an interesting financial question…

Can these guys deduct their fines as business expenses?

I actually addressed a similar question a few years back when Patriots coach Bill Belichick was fined $500k for videotaping an opponents defensive signals for future reference. At the time, a number of tax experts looked at the issue of whether or not such fines are tax deductible.

As I noted back then, the issue turns on whether or not the fines resulted from the offender breaking the law. If so, then they cannot be deducted. Short of that, “ordinary and necessary” business expenses are deductible.

According to Myron Grauer, Belichick’s fine was deductible because it was an “ordinary” expense:

“…in this day and age, it probably is â€˜ordinaryâ€™ for coaches and players in professional sports to cheat and, if caught, to be fined by the league, the fine levied on the Patriotsâ€™ coach can be viewed as an ordinary and necessary business expense.”

Mike McIntyre of Wayne State University went on to argue that:

“The fine was for violating a rule, not for cheating. No professional football game is played without someone breaking the rules. It is expected that people will break the rules.”

While I’m no tax expert, I would think that similar logic would hold for the three players fined this past week. They violated the rules, and such violations happen in pretty much every game. It is therefore expected that people will break the rules, sometimes to the point that they get fined for doing so.

What do you think? Tax deductible, or not? And beyond that… What do you think about the plays and the resulting fines? Did the NFL go far enough? Too far?

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Published on October 22nd, 2010
Modified on October 20th, 2010 - 13 Comments
Filed under: Taxes

About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

13 Responses to “Are NFL Fines Tax Deductible?”

1
JamesR Says:
October 22nd, 2010 at 2:49 pm
Not tax deductible.

If the players & coaches are fined for doing something they ought not to do, they ought not to be able to recoup their losses.

Cheating as a normal course of business, “an ordinary and necessary business expense”? Are these guys goofy? They should be held to higher standards than that.

I wouldn’t let anyone with that lack of integrity work for me.

As for the players causing others to get concussions, playing more roughly than they ought, are they doing this on purpose?
2
BG Says:
October 23rd, 2010 at 9:11 am
Absolutely, a tax-deductible business expense. Let’s say, for example, you could purchase NFL-Fine Insurance — that you pay premiums toward, and they pay any fines your team gets during a game.

Everyone will agree that this Insurance Policy would be a tax-deductible business expense. So why would eliminating the middle-man (insurance company) change that?
3
Charlie Says:
October 23rd, 2010 at 11:57 am
Of course it’s deductible. The NFL is a business that has business agreements with players and coaches. The players and coaches voluntarily put themselves in this business arrangement, and “pay to play”.

If Congress decided that it should be against the law for coaches and players to break NFL rules, then it would not only be not deductible, but there would be criminal charges for breaking the rules.

Come to think of it, that’s not too unlikely. Just give the NFL time to need a bailout and who knows what the clowns in DC will come up with.
4
Evan Says:
October 23rd, 2010 at 12:48 pm
I thought all NFL fines went to charity, so as long as the charity is a 501(c)(3)organization I don’t see a problem with it being tax deductible.
5
Olivia Says:
October 23rd, 2010 at 2:02 pm
Who gets the fines and are they considered taxable income? If they go to non profits, the fines would be considered “donations” even though they’re not voluntary. Who choses which non profits gets the cash?
6
Timmy Says:
October 23rd, 2010 at 2:41 pm
Uh…who cares??? It’s not like this is a scenario any of us are going to face.
7
Timmy Says:
October 23rd, 2010 at 2:44 pm
Who cares??? This is not a situation any of us are ever going to face so why waste the time even researching it? Must be a slow day in fantasy football…
8
Erik Says:
October 23rd, 2010 at 4:20 pm
Another angle: Do they write a check back to the league, or does the league deduct it from future paychecks? If it’s deducted before hand, one could argue that they never received the money, and therefore it was never income.
9
Nat Says:
October 24th, 2010 at 11:28 am
The way this is handled in virtually all of the major sports leagues is that the player/coach/executive fined has the option of making a similar dollar “donation” to the charity of their choice, in lieu of paying a fine to the league. Everyone wins that way…fine is assessed, charity contributions from the league/representatives grow, good will in the community, and a tax deduction for the “offender.”
10
Chucks Says:
October 25th, 2010 at 11:55 am
It’s deductible. People all too often confuse breaking rules in sports as somehow equivalent to breaking state and federal laws. They aren’t the same. Players end up breaking rules all the time, intentional or not. Fouling is a common enough occurrence that it’s actually part of many games, and intentional, strategically timed fouls are a big part of play. When these are league assessed-fines, they are deductible. Now, if a player just walks into another teams locker room and starts punching the living daylights out of another, that’s assault, a federal offense, and any cost of bail, lawyers, etc. are not business expenses.
11
Tom M Says:
November 2nd, 2010 at 11:56 pm
The NFL can fine as much or as little it wants and the players have a choice to play by the rules, not play by the rules, or not play at all. It’s a private business.

Likewise, if an employee (that is not a pro football player) screws up at work – he might get a lower raise, lose his end of year bonus, or even get a pay cut. In all those instances, his taxes will go down simply because he is earning less money. For NFL players, it is the same thing – they screwed up at work, so now their salary goes down by the amount of the fine.

Of course it is deductible.
12
Trav Says:
September 18th, 2011 at 1:15 pm
You can bet that the NFL is getting taxed on the money they receive from these fines. It’s completely unethical to tax the fine as income and then not let the payer deduct the amount from his own taxes.

But “unethical” doesn’t mean it doesn’t happen.
13
Jeff S Says:
November 2nd, 2012 at 3:45 pm
First to Erik regarding “never receiving it”… the same could be said for anythign withheld from your pay and things like your Federal withholding are not deductible so that argument is no good.

It is not voluntary, so its not a contribution deduction.

For the players, i would say it is an employee business expense since the fine is levied by a non-governmental body which would have made it non deductible. As an EBE, there are certain other tax ramifications that kick in and limitations on deductibility based on income level.

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