X’s and Ow!’s: Six facts about football players, taxes and the ACA

We've been thinking a lot about taxes and healthcare, and our anticipation of Sunday's championship game brought some things to mind.  The gridiron is many things to many people, and players generally take the risks in stride while we enjoy the excitement. But like any of us, players need to think long and hard about their health coverage, and not all of them have it made for life just because they played in the NFL. Consider the following: 

Not everyone - and certainly not every player - is equally lucky.  Running backs, for instance, are distinguished by two troubling facts: they are most likely of all NFL player groups to get hurt and they (along with safeties and kickers) are among those in the NFL with the lowest average salaries.  And doubtless because of the physical stress and their time on the Injured Reserve (IR) list, running backs have an average tenure in the league of only 3.6 years as compared to the NFL-calculated average of 6.0 years for all players.  Their game is the roughest of the rough, and that in an already rough and risky environment.

But running backs get paid plenty to compensate them for the risk, right?  Well, the average running back in the NFL may pull down $957,360, and he'll easily pay a marginal rate of 39.6%.  In addition, most will also have the state tax man to pay. (Florida, Texas, Washington and Tennessee are NFL-host states that don't tax wages, though Titans fans may know something about Tennessee's "hall tax" on dividends.)  Over their playing tenure, then, they may net somewhere about $2 million after taxes.  If they sock away about 10% of this money, then they'll have roughly enough to retire at age 65 and live like a regular American just above the median household income.  Depending on the number of years with the league and when they started in the NFL, they may also qualify for a pension - but the monthly pension for running backs with three seasons would be only about $1,410.  Frugality is the post-season mantra for many former players.

So, what about healthcare?   Because current players have health coverage and typically very high income levels, they are highly unlikely to be able to deduct medical bills on their tax return.  Because the Affordable Care Act (ACA) increased the threshold for the excess medical deduction in 2014 for persons under 65 to 10% of Adjusted Gross Income, the average running back would be able to deduct medical costs only if they had medical expenses in excess of about $96,000 per year while they are playing! 

But the need for coverage persists long after the last whistle.  Former NFL players typically do not qualify for continued comprehensive health insurance coverage.  Thus, they will - like all Americans - need to seek out alternatives.  Under the Affordable Care Act, they can enroll in a qualified health plan in one of the new insurance marketplaces.  If they don't have job-based coverage and their income is below the limit (e.g., $94,200 for a household of four), then they can get a sizable tax credit to help cover the premium costs.  This last point is critical: the federal government only looks at the current income: the government does not look at last year's income or even current assets when determining eligibility for the tax credits. He may have a million in the bank, but an unemployed former player can still get help with his health insurance premiums.

So can former players score under the ACA?  As with all matters related to taxes, it depends on their individual circumstances but certainly they are eligible to participate if the facts and circumstances match up.  Which is why we invite former NFL players - and all of their fans - to get help with their taxes and the ACA from their local Jackson Hewitt Tax Pro.