The NFL as a League Does Not Pay Federal Income Tax

The National Football League itself — the central office that runs the sport — is classified as a tax-exempt organization under section 501(c)(6) of the Internal Revenue Code. This means the league office does not pay federal income tax on the money it collects from broadcasting rights, sponsorships, and merchandise licensing. That status has been in place since 1942.

However, this exemption applies only to the league office in New York, not to the individual teams. Each of the 32 NFL teams is a separate business entity and pays taxes on its profits. The teams keep most of the revenue they generate locally — ticket sales, concessions, local sponsorships — and those profits are taxed.

The league office's tax-exempt status became public controversy in 2015, when Congress questioned whether a sports league should hold that classification. In 2015, the NFL voluntarily gave up its tax exemption, though the teams themselves retained their own tax structures. The change was largely symbolic: the league office had been paying taxes on most of its income anyway through other mechanisms.

Key Takeaways

  • The NFL league office was tax-exempt until 2015, when it voluntarily surrendered that status after public pressure.
  • Individual NFL teams are taxed on their profits, though the exact amount depends on their ownership structure and local tax laws.
  • NFL players pay federal income tax, state income tax, and local income tax on their salaries, just like other workers.
  • Teams can deduct certain business expenses — stadium maintenance, player salaries, coaching staff — which reduces their taxable income.
  • Some teams operate as S-corporations or partnerships, which affects how ownership and taxes are handled.

How Individual NFL Teams Handle Taxes

Each NFL team is owned by a person or group and operates as a business. The team's taxable income is calculated by subtracting operating expenses from revenue. Revenue includes ticket sales, concessions, parking, local sponsorships, and a share of the league's national broadcasting and merchandise deals. Operating expenses include player salaries, coaching staff, stadium operations, insurance, and marketing.

The tax structure varies by team. Some teams are organized as C-corporations, which means the business itself pays corporate income tax and owners pay tax again on dividends. Others are structured as S-corporations or limited partnerships, which pass income through to the owners, who then pay tax at their individual rates. The ownership structure is chosen partly for tax efficiency and partly based on how many owners are involved.

Teams also benefit from depreciation deductions. The IRS allows teams to depreciate the value of their players' contracts over time, which reduces taxable income even though no actual cash leaves the business. This is one reason why sports teams can show losses on paper while still being profitable in cash terms.

What NFL Players Pay in Taxes

NFL players are employees and pay federal income tax, state income tax, and local income tax on their salaries. The federal tax rate depends on income level — higher earners pay a higher percentage. Most NFL players fall into the top federal tax bracket, currently 37 percent on income over a certain threshold, though the actual rate depends on deductions and credits.

Players also pay state income tax in the state where they play. California, for example, has a state income tax rate that reaches 13.3 percent for high earners. Texas and Florida have no state income tax, which is one reason some teams are located there. Players may also owe local income tax in their city.

Additionally, players pay self-employment tax on certain income, and they contribute to Social Security and Medicare through payroll deductions. Many players hire accountants to manage their tax obligations across multiple states, since they may earn income in different states during the season and off-season.

The Difference Between League Revenue and Team Profit

The NFL generates roughly $15 billion in annual revenue from broadcasting, sponsorships, and merchandise. This money is divided among teams according to a formula: roughly half is split equally among all 32 teams, and the other half is divided based on performance and market size. However, receiving a share of league revenue does not mean a team keeps all of it — the team must pay its players, staff, and operating costs first.

A team's taxable profit is what remains after all expenses are paid. A team in a large market with high ticket prices and local sponsorships may be more profitable than a team in a smaller market, even if both receive the same share of national revenue. The team's ownership structure and debt level also affect how much tax is owed.

Stadium Financing and Tax Breaks

Many NFL stadiums are built or renovated with public money — bonds issued by cities or states. These bonds are often tax-exempt, meaning the interest paid to bondholders is not subject to federal income tax. This makes the bonds cheaper for the city to issue, but it also means the public is effectively subsidizing the stadium through foregone tax revenue.

Teams themselves may receive property tax abatements or sales tax exemptions on stadium operations, depending on local law. These are negotiated as part of the deal to keep or attract a team. The tax breaks reduce the team's operating costs and increase its profit, but they represent revenue lost by the city or state.

How Depreciation Deductions Work for Teams

The most significant tax advantage for sports teams is the ability to depreciate player contracts. When a team signs a player to a multi-year deal, the IRS allows the team to deduct a portion of that contract value each year as a depreciation expense, even though the team is paying the player in cash when ready.

For example, if a team signs a player to a five-year, $50 million contract, the team might deduct $10 million per year as depreciation, reducing its taxable income by that amount each year. This is separate from the actual cash payment to the player. The depreciation deduction exists because the IRS treats the player contract as an asset that loses value over time — similar to how a business can depreciate equipment or vehicles.

This deduction is one reason why teams can report accounting losses while still generating cash profit. A team might show a $5 million loss on its financial statements due to depreciation deductions, but actually have positive cash flow after paying all expenses.

Frequently Asked Questions

Does the NFL pay taxes on broadcasting money?

The league office collects broadcasting revenue and distributes it to teams. The league office itself no longer has tax-exempt status as of 2015, so it pays taxes on the money it keeps for operations. Teams pay taxes on the broadcasting money they receive as part of their overall taxable income.

Why did the NFL give up its tax exemption?

The NFL voluntarily surrendered its tax-exempt status in 2015 after Congress and the public questioned whether a sports league generating billions in revenue should be classified as a nonprofit organization. The change was largely symbolic because the league was already paying taxes on most of its income through other mechanisms.

Do NFL players pay taxes on signing bonuses?

Yes. Signing bonuses are taxable income to the player in the year they are received. The team can deduct the bonus as a business expense, but the player must report it as income and pay federal, state, and local taxes on it.

Can teams deduct player salaries from their taxes?

Yes. Player salaries are a business expense for the team, so they reduce the team's taxable income. However, the player must pay income tax on the salary they receive. The salary is deducted once at the team level and taxed once at the player level.

What happens if an NFL team operates at a loss?

If a team's expenses exceed its revenue in a given year, it may report a loss on its tax return. The team can carry that loss forward to offset profits in future years, reducing future tax liability. However, teams rarely operate at true economic losses because depreciation deductions often create paper losses while the team generates positive cash flow.