Cleveland, Ohio has historically been one of America’s most populous and productive cities, peaking as the fifth-largest back in 1920. Today, “C-town” is a shadow of its former glory, another Rust Belt factory town, best known for the Rock and Roll Hall of Fame. But last week, Clevelanders had reason to celebrate once more. Are we talking about the Republican National Committee’s decision to host their 2016 nominating convention in the city dubbed “the Mistake on the Lake”? Of course not! We’re talking about basketball superstar LeBron James’s decision to leave the Miami Heat and return to the city where he spent the first seven years of his career.
On the face of it, James’s decision seems curious. Few athletes with any choice in the matter would happily trade Miami’s bright lights, sunny pastels, and Caribbean vibe for Cleveland’s cold winters, gray skies, and flammable river. But LeBron, who grew up in nearby Akron, believes in home — and for him, the move is a slam dunk. “My presence can make a difference in Miami, but I think it can mean more where I’m from,” he told Sports Illustrated. “I want kids in Northeast Ohio . . . to realize that there’s no better place to grow up. Maybe some of them will come home after college and start a family or open a business . . . Our community, which has struggled so much, needs all the talent it can get.”
Cleveland fans aren’t the only ones who will applaud LeBron’s move. You can be sure that basketball fans at the IRS will cheer, too. LeBron will make a reported $20.7 million per year in Cleveland — $1.6 million more than the $19.1 million he earned last season in Miami. He’ll pay the top income tax rate of 39.6% on that difference, along with an extra 3.8% Medicare tax — and that, in turn, will mean about $694,000 more for Uncle Sam. (His total Medicare tax on his playing salary will reach almost $785,000, or nearly enough to pay for a heart transplant.)
But the biggest winner here may be the Ohio Department of Taxation. Last season, LeBron played his home games at Miami’s American Airlines Arena, where he enjoyed Florida’s lack of personal income tax. When he returns to Cleveland’s Quicken Loans Arena, he’ll pay Ohio’s top rate of 5.421%. That’s no mere technical foul — state taxes on the half of his games that he’ll play at home will run more than half a million dollars per year!
Fortunately for LeBron, he makes his real money off the court. In 2013, he collected a whopping $50 million in endorsements from Nike, Coca Cola, Cadbury Schweppes, Juice Batteries, Upper Deck, Cub Cadet, McDonald’s, Microsoft, and State Farm — among others. He was an early investor in Beats by Dre, and reportedly parlayed that stake into $30 million when Apple acquired the headphone maker. But LeBron will keep his residence in Florida, which should shelter the bulk of his financial three-pointers. No less a business authority than Warren Buffett has said of LeBron, “He’s savvy. He’s smart about financial matters. It’s amazing to me the maturity he exhibits.”
When it comes time to pay all those taxes, you can be sure that LeBron James doesn’t just drop off a shoebox full of receipts with his accountant on April 15. He’s got a plan to “defend his net” as vigorously as the law allows. Now, you probably can’t fill Lebron’s size-16 sneakers. But you can take advantage of the same sort of proactive planning that superstar athletes use to save millions. And you don’t even have to wait for free agency! You just have to pick up the phone and call Bordeaux & Bordeaux CPA’s. So, what are you waiting for?
“Serving Charlotte Area Small Business Owners since 1996″