The real reason LeBron chose Miami

*I was challenged at work to come up with a relevant tax issue and write an article. My supervisor told me my article was a little too light hearted to publish on our company website. I just want those angry fans to know the real reason he's moving to Miami...it comes down to the bottom line.

All business minded people know to consult their accountant before making a major deal. LeBron James did just that before he recently announced he would be trading in his Cleveland Cavaliers jersey for a spot with the Miami Heat. The Cavalier fans hoping to keep James in his hometown could not understand how he could walk away from an offer that would pay out $4 million more than the next offer over the next five years. The answer to their wonderment and LeBron's decision was all about the taxes.

Kyle Gillies in a New York Post analysis breaks down the numbers. "On a five-year contract worth $96 million-what he'd get from the [New York] Knicks of the [Miami] Heat - LeBron woudl pay $12.34 million in New York taxes." The Tax Prof Blog gives the tax amounts for the states of the other teams Mr. James was considering: New Jersey Nets- $10.32 million, Cleveland Cavaliers- $5.69 million, Chicago Bulls- $2.85 million and Miami Heat $0. Of course the tax situation gets more complex when factoring in away games, play-off games, endorsements, investments, etc., but the simple fact is the income tax savings for choosing to work in Miami is staggering.

LeBron is not the first, nor will he be the last professional athlete that takes taxes into consideration when they are making a career move. Many professional athletes make their home in Florida, Texas, or Washington among other states that do not impose a state income tax.

The non-residential tax ("jock tax") that is levied on traveling business professionals, particularly sports professionals in each state where they earn an incomes proves brudensome when April 15th rolls around each year. Kevin Baxter of the Los Angeles Times quips that "if opening day is the best day of the year for professional athletes, then April 15-tax day- is probably the worst". Professional athletes must file a return and pay taxes in each state where they did their job (aka played a game or practiced). Because professional athletes such as LeBron James sign contracts that pay out large sums, they become a target for audits. Each state wants a portion of those high paying contracts. For LeBron making a home in a no-income tax state alleviates some frustration of filing so many returns because about half of his games will be played in Florida. This aids him in keeping a lot more of that high paying contract for himself.