(Players celebrate after winning the World Cup. Photo by Instablog9ja)
In addition to being the biggest sporting event in the world, the World Cup is now a significant tax event for the IRS.
Even before Sunday’s championship match between Spain and Argentina, several clear winners had already emerged from the tournament, which was co-hosted by the US.
The IRS can be counted among them, given the massive cash winnings, sponsorship deals and paid appearances at stake for both established stars and newly famous competitors across the 48-nation competition.
Generally speaking, any money earned on American soil is taxable by the Internal Revenue Service, according to experts.
Spain won the championship 1-0 on Sunday, claiming the $50 million first-place prize from FIFA, a fraction of the $655 million total pot available to competing national teams depending on performance.
Robert Raiola, director of the sports and entertainment group at PKF O’Connor Davies, noted that regardless of who wins, the IRS gets its share, adding that this applies not only to players but also to coaches, team staff and referees.
He said every team that participated in the tournament would leave with some form of tax bill.
Professional athletes across sports typically face complicated tax situations, given that they play in multiple countries with differing tax codes, often earn performance-based compensation, and may work as employees or independent contractors while also drawing income from royalties and endorsements.
The World Cup compounds this complexity, partly because of how existing US tax treaties with certain countries may include exemptions for athlete pay.
Rob Fagan, senior manager in KPMG’s Washington National Tax practice, rated the tournament’s tax complexity an 8 out of 10, noting that his firm had advised several national federations on related tax matters.
He said top players usually have financial experts to help navigate the process, but newer players unfamiliar with the global spotlight might find the tax obligations surprising.
Notably, FIFA does not pay players directly; prize money instead goes to national federations, which determine how funds are distributed among players, coaches and staff.
Federation Exemptions
According to an earlier report, the federations behind all participating World Cup teams were expected to receive tax-exempt status this year, similar to FIFA’s own exemption, which has been in place since 1994.
However, Fagan clarified that a federation being tax-exempt does not mean players, coaches or staff are automatically exempt from US taxes a misconception he said is common.
International tax treaties, designed largely to prevent double taxation, may reduce or eliminate certain tax obligations, though such carve-outs often depend on the amount of money involved; above a certain threshold, the full amount may become taxable.
The US has a tax treaty with Spain but not with Argentina, according to IRS records.
Christopher Hall, a director in the international tax group at PKF O’Connor Davies, said the tax situation for international football players can be extremely complicated, citing scenarios where a player’s club-based.
Residency and national team selection could raise questions about which treaty terms apply and whether such terms cover players but not necessarily support staff like medical personnel.
He noted that different players on the same team could face different tax outcomes, stressing the importance of reviewing the full travelling group.
Last month, the IRS reportedly reached an understanding with tax authorities in Canada and Mexico, the tournament’s co-hosts, on how to determine which portions of earnings should be considered US-sourced versus Mexican- or Canadian-sourced income.
The IRS’s National Taxpayer Advocate followed up with tax guidance for foreign participants in the tournament including players, coaches, staff, media personnel and businesses outlining relevant forms and rules, and ultimately advising participants to seek professional guidance given the complexity of the US tax system for international taxpayers.
Some States Are Also Getting a Cut, Thanks to ‘Jock Taxes’
Beyond federal taxes, state income taxes add another layer. Games were hosted across nine states and 11 US cities, though three of those states Texas, Florida and Washington do not levy their own income taxes.
This is where the so-called “jock tax” comes in. Raiola explained that individuals earning money in a state where they don’t reside are generally subject to income tax in that state, though credits may apply depending on interstate agreements.
He noted that high-profile, highly paid athletes are closely tracked by state tax authorities, who ensure they are billed accordingly a consequence, he said, of being both well-known and well-compensated.
Sunday’s championship was played in New Jersey, which has its own income tax and does not follow international tax treaties, according to Fagan.
Raiola said New Jersey’s tax authorities would certainly be collecting tax on the earnings from that game.
