Need A Tax Deduction? Get Fined For Something
This past season, Cincinnati Bengals wide receiver Chad Ochocinco was fined $30,000 for wearing a sombrero after a touchdown and $20,000 after he flashed a dollar bill at an official during a replay challenge.
But all isn't lost. That’s because the price he paid for his shenanigans is actually tax deductible.
Fines are classified as ordinary business expenses, according to sports tax accountant Robert Raiola of Van Duyne, Behrens & Co.
In order to deduct, Raiola says the fines have to be greater than two percent of a player’s total adjusted gross income because the IRS stipulates that the first two percent of employee business expenses are not deductible.
But assuming Ochocinco—who made $4.75 million last season—paid the standard three percent to his agent Drew Rosenhaus, he’s already above the 2 percent or $95,000 floor.
So how much of a deduction can Ochocinco take on the two fines?
The $50,000 in fines will result in Ochocinco paying approximately $17,500 less in federal income tax, Raiola said.
“Based on his tax bracket, every $10,000 in fines, will save him $3,500 in taxes,” Raiola said.
Not all fines are tax deductible, including any penalties imposed for breaking the law. Many of the leagues donate the money generated from fines to charities.
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