Most Valuable Agent with Matt Hannaford
Episode: “What Players REALLY Keep: The Shocking Truth About MLB Taxes & NIL Money”
Date: November 26, 2025
Special Guest: Stephen Caceres, CPA and former pro baseball player

Episode Overview

This episode dives deep into an eye-opening but little-understood aspect of professional baseball: how much of players’ contracts and NIL (Name, Image, Likeness) deals they actually take home after taxes, fees, and the fine print. Host Matt Hannaford is joined by former Kansas City Royals player turned athlete CPA, Stephen Caceres, to explain the ins and outs of sports taxation, the impact of state residency, landmark contract structures, NIL complexities, and the real-world best practices for players (and parents) to optimize their earnings.

Key Discussion Points & Insights

Stephen’s Baseball & CPA Journey (00:12–03:11)

• Stephen’s Playing Background: Drafted by the Dodgers in 2005, chose to go south for college (James Madison University) for exposure and opportunities, influenced by proximity for family support.
• Transition to Athlete CPA: Unique insight from having lived both sides—knowing the pain points, limited opportunities, and unique earning patterns athletes face.

“So you play professional baseball with the Kansas City Royals, drafted by the Dodgers in 2000... a ninth rounder, man got fourth round money.” – Matt Hannaford & Stephen Caceres (00:26)

The Real-World of Athlete Taxation

CPAs for Athletes vs. Regular CPAs (03:11–04:08)

• Most local CPAs don’t understand the complex ways athletes are paid (signing bonuses, duty days, split season residency).
• Specialized athlete CPAs help set up optimal structures, not just file returns.

“A CPA for a professional athlete is vastly different… there are things you have to calculate and be aware of that a normal CPA… may not be aware.” – Matt (03:24)

Decoding Signing Bonuses & State Residency Strategies (04:40–18:27)

Signing Bonuses: What Players Actually Keep

• Players often expect to pocket the full bonus amount, but after federal taxes, state taxes, and agent fees, actual take-home can be just 60%.

• Federal tax is unavoidable; strategic state residency can make a dramatic difference (e.g., FL, TX, TN, WA residents pay no state income tax).

• Proactive pre-draft planning helps families see the after-tax reality across possible teams and states.

  “I remember actually when I first signed…one of my buddies, he lived in Texas, and I was a New York resident…he kept a lot more than I did.” – Stephen (06:38)

Splitting Signing Bonuses Over Two Tax Years

• Most MLB teams split major bonuses into two payments over two tax years, lowering players’ overall tax brackets, sometimes saving tens of thousands.

  “By splitting it up over two years, they’re saving substantial…could be tens of thousands of dollars...” – Stephen (10:48)

Establishing State Residency: Not a Simple Fix

• Simply buying property or registering to vote in a no-tax state isn’t enough; states like CA and NY are extremely aggressive.

• Intent matters: Where you actually live, get healthcare, bank, have your driver’s license, vote, etc.

• The gold standard: “If you set up as FL or AZ resident, you need to live there, not just make it look good.” (16:55–17:19)

  “California may not come back in a year, two years, they may come back five years from now...” – Stephen (12:24)

How Teams Source & Withhold Taxes (18:27–26:22)

• Historically, teams sourced signings to players’ home states; now, payments are often sourced to the assigned minor league affiliate’s state—but rules and practices still vary widely by organization.
• Teams decide where to assign payments, but players (via their CPAs) can “clean it up” on the tax return if sourced incorrectly.
• Example: A player tax-sourced to his childhood home state but actually a resident elsewhere—recovery required, often involving lots of back-and-forth with state authorities.

Regular Season, Deferred Compensation, and "Jock Tax" Nuances

How Players Get Paid (28:53–29:36)

• Pros (especially MiLB) only earn salary during “championship season”—roughly five to six months, not year-round.
• Big-league salaries (now $780K minimum) are paid throughout the regular season, with playoff compensation separate.

Shohei Ohtani’s Groundbreaking Deferred Contract (29:35–37:15)

• Ohtani’s contract: 98% deferred, receiving only $2M annually for the first 10 years.
  • Allows him, post-playing, to potentially avoid California state tax on most pay if he is no longer a California resident—though federal and Japan taxes still apply.
• Discussion on complexity and risk (states can always change the law), and why top players’ contract structures don’t necessarily fit most others.
• Interest lost on deferred amount may or may not be compensated for by long-term tax savings.

“If Shohei wants, he could leave California…receive that money and it doesn’t get taxed [by CA]… but Japan would have to tax it.” – Matt (30:12–30:50)

“From a tax perspective, it’s brilliant… But again, that’s not to say a high-profile athlete, they [CA] come back and change something.” – Stephen (36:05)

NIL Money: What Student Athletes & Parents Must Know (37:15–43:22)

• NIL Boom: College athletes now earning serious money; tailored advice required for those with NIL income.

• LLC or No LLC? Setting up an LLC gives long-term tax planning flexibility, particularly for those earning significant NIL money (tens of thousands+), but isn’t necessary for $15–20K range.

• S Corps and Payroll: For high-income athletes, converting LLCs to S Corps and paying themselves a “reasonable salary” can result in big tax savings.

• Best Practice: Always consult a specialized CPA before setting up legal entities or accepting deals.

  “Each situation is totally unique to the client. The LLC gives you some flexibility… but really makes sense for people making serious money from NIL.” – Stephen (41:44)

Pro Ball: Multi-State Taxation & The “Jock Tax” (43:22–51:27)

• Multi-State & City Taxation: Big leaguers have salary sourced to every state/city where they play—especially in “jock tax” states like CA, NY, etc.; minor leaguers largely avoid this, as amounts are small.

• Duty Day Schedule: Taxable income is split according to games played in each location, impacting final returns—CPAs track schedules, injuries, travel, etc.

• Pittsburgh’s Infamous City Usage Tax: Once a 3% “use” tax (not income tax) was levied just on athletes; struck down as unconstitutional in favor of pro athletes.

  “It started…in 1991—LA Lakers and Chicago Bulls…California taxed the Bulls. The year after, Illinois retaliates. Now, all these states start doing it… schedule is public info.” – Stephen (47:59)

Organization, Documentation, and Deductions (51:27–56:53)

• Staying Organized: Centralize all mail, organize financial documents, track where money is, and have access to all relevant online and physical statements.

• Deductibility Rules: Post-2017 tax law gutted many player-specific deductions (training, equipment, agent fees); only expenses directly tied to generating endorsement/NIL income (agent fees, travel for the appearance, etc.) are still deductable.

• Best Practice: Keep thorough, organized records and consult a knowledgeable CPA or attorney as early as possible.

  “It is organization… have all the mail go [to one place]…a lot of stuff we do is still through the mail.” – Stephen (51:47)

Notable Quotes & Memorable Moments

• “You think you’re getting that [signing bonus] when, at the end of the day… looks much different, 60% of that.” – Stephen (05:44)
• “California may not come back in a year, two years, they may come back five years from now and be like, ‘You were here in California. We want a chunk of that money.’” – Stephen (12:24)
• “If Shohei wants, he could leave California… and receive that money and it doesn’t get taxed [by CA]. However, Japan would have to tax it.” – Matt (30:12)
• “If you set up as a Florida or Arizona resident, you need to live there. Not just make it look good… That shouldn’t be how you look at it.” – Matt (16:55)
• “Don’t try and do it on your own. Ask questions, speak to a professional.” – Matt (59:03)

Recommendations for Parents and Athletes

• Consult Experienced CPAs: Especially those who have worked with pro athletes—don’t rely on standard local CPAs.
• Organize: Centralize all communication and documents, maintain updated addresses, and keep records for eventual tax or legal questions.
• Understand Residency Rules: Simply owning property in a no-tax state isn’t enough—intention and actual use matter.
• Consider Contracts and NIL Payments Carefully: Don’t blindly set up legal entities; ensure they're appropriate for your earnings bracket.
• Track Deductions: While most are no longer valid, agent fees and direct expenses for earning NIL income can be claimed—keep receipts and records.
• Stay Educated and Proactive: The tax environment changes; good representation and solid documentation will always be your best defense.

Contact Information

• Stephen Caceres, CPA:
  Email: steven@gpcpas.com
  (as shared by Stephen; Matt also has his contact if needed)

This episode is essential for parents, players, and anyone aspiring to understand the real financial world inside professional baseball—from your first bonus to superstar contracts and the new universe of NIL deals. Reach out to top professionals, ask questions, don’t DIY your taxes, and stay organized!