Shaquille O’Neal was often among the highest-paid players in the league. Having signed contracts totalling up to $292 million in salary during his NBA career, he understands how the numbers are bloated. One of the main reasons behind it are the taxes in the US are different for different states. In October 2023, on the Owned With Rex Champan podcast, Shaq explained the taxes in LA using Lakers superstar Anthony Davis’ massive contract extension.

“Anthony Davis is about to sign for $360 million for six years. He’s not getting $360 [million]. He’s only getting $180 [million]. So, it looks good on paper. ‘He’s about to get $60 million a year.’ 50% of that money is gone [in taxes].”

Shaq is speaking here from experience. In 1996, he signed a seven-year, $120 million extension with the Lakers, an NBA record at the time. The Lakers man, as any other 24-year-old, was blown away by the face value of the contract. However, he was underwhelmed once he realized only $60 million would go into his pockets.

On the podcast, O’Neal advised young players to learn about the different types of taxes, including FICA and jock tax, that would be levied on them. He revealed that he had to pay jock tax, a state income tax levied on athletes, despite being injured and not travelling with the team outside Los Angeles. He claimed that players don’t have to understand how to calculate taxes and become experts.

However, they should be aware of where their money goes and how much it will be taken away in taxes. Shaq explained that once players understand the basics, they can strategize on retaining as much money as possible.

Shaq’s advice must be helpful for young athletes, who might lose some part of their money in taxes which can be levied on. After all, he was one of the planet’s highest-paid athletes in his prime, earning close to $500 million in salary and endorsements during his playing days.

The various taxes that NBA players are subjected to

NBA players sign contracts worth 100s of millions almost every year. However, they are subjected to eye-watering amounts of taxes. Any US citizen earning over $610,000  pays 37% in federal taxes. The NBA’s rookie minimum is $930,000, and the veteran minimum is $2.3 million. That means every player in the league has 37% of their salary taken away. State taxes vary in each state. Eight states in the US do not levy state tax, while some states, like Oklahoma, have a low tax rate. However, California, which houses four NBA teams, has a state tax rate of 12.3% for individuals earning over $610,000.

To explain how much an NBA player will have to pay in taxes in California, let’s take Anthony Davis’ contract as an example. The Lakers superstar signed a $186 million extension with the franchise and will earn over $62 million annually between 2025 and 2028. He’ll have to pay 37% in federal taxes and 13.3% in state taxes. Including Medicare, Social Security, and SDI (State Disability Insurance), Davis’ take-home salary will go down to $29.2 million.

A superstar like Davis will still be left with over $29 million. However, players lower on the salary spectrum will also subjected to the same tax rates. It’s evident why O’Neal advised young players to learn about taxes and plan how to save as much as possible.