New British Open champion Phil Mickelson not long ago walked back some comments he made about his tax burdens, after the reaction was predictably: “Boo-hoo, Phil-lionaire.” But as the following 2paragraphs about his recent windfall illustrates, he had a point.
The United Kingdom, which has authority to set Scotland’s tax rate until 2016, graduates to a 40% tax rate when income hits £32,010 then 45% when it reaches £150,000. Mickelson will pay £636,069 ($954,000, or 44.02%) on his Scottish earnings.
But that’s not all. The UK will tax a portion of his endorsement income for the two weeks he was in Scotland. It will also tax any bonuses he receives for winning these tournaments as well as a portion of the ranking bonuses he will receive at the end of the year, all at 45%. Without considering expenses, Mickelson will pay 61.12% taxes on his winnings, bringing his net take-home winnings to about $842,700. When expenses are considered (10% to caddy Jim “Bones” Mackay, airfare, hotel, meals, agent fees on endorsement income/bonuses—all tax deductible here and in the UK), his take-home will fall closer to 30%.
—excerpted from CPA K. Sean Packard‘s guest post at Forbes. Packard is Director of Tax at OFS Wealth
