A look at the tax implications of each of Dwight Howard’s options

By rahat huq | June 28, 2013 at 7:39 am

Forbes had a great analysis of this topic some weeks ago, but here’s another one I saw tweeted by Darren Rovell last night, in chart form.  It was created by CPA Robert A. Raiola.

the tax implications of each of Howard's options

Raiola concludes that with a jock tax of approximately $536,550/year, after factoring in the state tax distinction, Howard would be left with a net of almost $12.6 million for each of four years, if joining the Houston Rockets.  ”That’s a gain for Howard of $653,340 of net income, each year, even on a much lower annual salary.”

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Total comments: 20
  • Freebird says 12 hours ago

    Rahat may have hit on something in today's post. We not only have to convince D12, but also his agent. Remember, the Astros offered the same tax-adjusted money as the Mets after Carlos Beltran became a free agent, and Boras convinced him to go the the Mets because it meant more money to Boras. With all this being equal, it could come down to something as trivial as this.

  • 2016Champions says 13 hours ago

    Simply put,Dwight saves $4,786,713.82 in taxes over 4 years with HOU, or $1,094, 342.38 compared to what he would make with the Lakers over 4 years

  • feelingsupersonic says 3 days ago Completely agree johnnygold. One cannot underestimate the value of having Asik behind Howard to avoid foul trouble and more importantly allowing Howard to play freely and without reservation thus more confidence.
  • thejohnnygold says 3 days ago

    Agreed. More often than not the opposition will be looking at foul trouble early on. Most teams will probably try and counter with guard penetration to get Dwight in foul trouble. This is one reason I think keeping Asik is crucial--it eliminates this concern on our part. Even if Dwight gets hit with early fouls we can still compete quite effectively with Omer.

    The Rockets' pick n roll, with Dwight Howard, could become the most potent and lethal of all time. Think about that....

  • feelingsupersonic says 3 days ago Howard would be a classic example of a big man that you feed early which not only breaks the will of the opposing defenses early by racking up buckets in the paint and free throws from fouls at the rim as well as open looks for 3 point shooters but most importantly Howard gets hyped up to play defense as a result of being involved on the other end. Harden can get his buckets at any time and in a flurry once the tone has been set by the big guy early on. This is more or less the luxury McHale would have and would take advantage of with Howard, the Rockets would be a force to be reckoned with from the get go.
  • rockets best fan says 5 days ago

    He hated being second behind Kobe because he wouldn't pass him the ball. Being "second" doesn't mean that you necessarily aren't featured in the offense...unless it's Kobe.

    Check out Howard's splits from last season

    The thing I found most interesting was comparing his FGA's. In wins (11.9/game) vs. losses (9.2/game). From month to month. No matter where you look one thing stands out--the more Dwight shoots the better the Lakers fare. His fg% is .578. Most players fall below that after having it adjusted for threes and free throws. Giving Dwight the ball will be a good thing. I think the Rockets players recognize this and will have no trouble "feeding the big dog first".

    totally agree with this assessment. how many times did I say last year we needed a low post game? in addition to better defense Howard will provide that low post game. simply as that.

  • thejohnnygold says 5 days ago

    Howard should come to Rockets if he wants to contend NOW. For money and fame, he should stay at Lakers. Yes, they will definitely build around him to become a contender but it won't happen right away. I still wondering how he feel about taking a back seat to Harden. It seems he hate to be second man behind Kobe at Lakers.

    He hated being second behind Kobe because he wouldn't pass him the ball. Being "second" doesn't mean that you necessarily aren't featured in the offense...unless it's Kobe.

    Check out Howard's splits from last season

    The thing I found most interesting was comparing his FGA's. In wins (11.9/game) vs. losses (9.2/game). From month to month. No matter where you look one thing stands out--the more Dwight shoots the better the Lakers fare. His fg% is .578. Most players fall below that after having it adjusted for threes and free throws. Giving Dwight the ball will be a good thing. I think the Rockets players recognize this and will have no trouble "feeding the big dog first".

  • manmythlegend says 5 days ago

    http://m.sportsbusinessdaily.com/Daily/Issues/2008/07/Issue-213/Sponsorships-Advertising-Marketing/Bulls-G-Derrick-Rose-Chooses-Adidas-Over-Nike-For-First-Shoe-Deal.aspx
    Originally signed in 08 resigned last year for more money obviously.

    Dwight got his big contract with addidas in Orlando
    http://www.goodwinsports.com/2007/10/dwight-adidas-extension/

    I understand. But I have to think that the overall value of the contract is determined in part by the market the player is in (unless you are Lebron). It helps when you are in a top-4 or 5 market.

  • Cooper says 5 days ago http://m.sportsbusinessdaily.com/Daily/Issues/2008/07/Issue-213/Sponsorships-Advertising-Marketing/Bulls-G-Derrick-Rose-Chooses-Adidas-Over-Nike-For-First-Shoe-Deal.aspx
    Originally signed in 08 resigned last year for more money obviously.

    Dwight got his big contract with addidas in Orlando
    http://www.goodwinsports.com/2007/10/dwight-adidas-extension/
  • manmythlegend says 5 days ago

    http://smokingsection.uproxx.com/TSS/2012/02/derrick-rose-adidas-ink-a-reported-260-million-deal

    Rose signed that contract last year. While he would still make mega millions in shoe money playing in Atlanta or Detroit (two markets that sandwich Houston in the rankings), I think it helps his cause that he plays in the 3rd largest TV market in the country.

    Whether or not it happens (and for the sake of the Rockets, I hope it does but am doubtful), it would be a historic moment in the annals of sports free agency; a player in his prime leaving a major market via free agency.

  • Richards says 5 days ago

    Howard should come to Rockets if he wants to contend NOW. For money and fame, he should stay at Lakers. Yes, they will definitely build around him to become a contender but it won't happen right away. I still wondering how he feel about taking a back seat to Harden. It seems he hate to be second man behind Kobe at Lakers.

  • rockets best fan says 5 days ago

    Right, because Chris Paul, Derrick Rose, Melo and Amare have won so many championships.

    http://www.forbes.com/athletes/list/

    Cooper beat me to the punch, but he is correct. shoe contracts make up most of rose's and melo's money in that area. cp3 is the only one who may be benefitting from being in the LA market. Amare must have some kind of left over deal from his time in phoenix.

  • Cooper says 5 days ago Rose and melo have enourmous shoe contracts both signed with with Addias and Jordan respectively before they ever played a game in the nba and would have those in any city. I don't know how or why amare has so much endorsement money? Maybe they are from old long term contracts because he hasn't been good in a while. Regardless Howard also has a contract with Addias and isn't real marketable outside of basketball so I wouldn't think his total endorsement dollars would decrease signifcantly anywhere he went.
  • manmythlegend says 5 days ago

    true however if you don't win endorsement money dries up fast. companies want to be represented by winners.

    Right, because Chris Paul, Derrick Rose, Melo and Amare have won so many championships.

    http://www.forbes.com/athletes/list/

  • iampedro says 5 days ago

    What it really comes down to is where does he want to play... Who will enjoy him the most and where he can win the quickest.

  • rockets best fan says 5 days ago

    Players earn more money off the court. Playing in LA has huge advantage because exposure players have in big market and endorsement potential. Plus LA is a basketball town.

    true however if you don't win endorsement money dries up fast. companies want to be represented by winners.

  • Richards says 5 days ago

    Players earn more money off the court. Playing in LA has huge advantage because exposure players have in big market and endorsement potential. Plus LA is a basketball town.

  • Steven says 5 days ago


    Why would the federal tax be higher at the 21.9m salary, as opposed to the 23.6m salary?


    You state tax paid is a deduction in your AGI, thus lowering the taxable amount.
  • manmythlegend says 5 days ago

    Why would the federal tax be higher at the 21.9m salary, as opposed to the 23.6m salary?

    Maybe he gets a tax break since he has to pay state taxes in Cali?

    I'm glad someone finally put concrete numbers to this added benefit of playing in Texas. To me, $650k/year is a ginormous difference. To D12, however, it would mean filming a couple of Snickers commercials. I don't think he seriously will consider the tax differential as a huge difference-maker when he makes his decision. He can make that money back, and more, with the endorsement and media opportunities being in the LA market can offer. It just comes down to whether or not D'Antoni gets canned and how much he really, really, truly, seriously wants to win.

  • Freebird says 5 days ago

    Why would the federal tax be higher at the 21.9m salary, as opposed to the 23.6m salary?

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