Phil's UK Tax Bill And The Implication For More Links Golf

CPA K. Sean Packard, CPA "specializes in tax planning and the preparation of tax returns for pro athletes" and has broken down Phil Mickelson's winnings in Scotland from the last two weeks: His conclusion, well, Phil netted very little in actual on course earnings after the Queen gets her take to pay for George's diapers and California pays four teachers.

Seriously, this is an important topic as it relates to getting top players to play the Scottish Open, BMW at Wentworth or an English Open if it could ever be made to happen.  Players simply avoid playing in the UK more than they need to because of the stifling tax rates on top of what they pay here at home. First world problems, indeed, but nonetheless important for everyone (myself included) to remember when we lament why more players don't play Royal Aberdeen next year, or why the PGA Tour does not play a WGC event in the UK or why we don't see more tournaments on the great links of the U.K.

For his two weeks of play, the world’s best golfer (rankings be damned) earned £1,445,000, or about $2,167,500.

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%. It is a significant amount for Mickelson, with only Roger Federer and Tiger Woods earning more among athletes from endorsements and appearances.

Packard goes on to lay out the tax bill in the U.S. (foreign tax credit!) and California

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%.

Of course Phil will benefit in the endorsement world and, oh yeah, he's the Champion Golfer of the Year having won The Open at Muirfield, over a star-studded leaderboard with a round that will talked about for ages. No tax bill can take away that.