Phil Mickelson's consolation, a lower tax bill
As we all saw, Phil Mickelson was mightily disappointed at his sixth runner-up finish in the U.S. Open on Sunday. K. Sean Packard has found a bit of silver lining: Mickelson saved a ton in federal and California state taxes.
The topic is pertinent, of course, because Mickelson went public with his concerns about his tax rate earlier this year. His comments prompted strong reactions both critical and supportive, and he ultimately apologized to ''anyone I might have upset or insulted.''
''By tying for second place, he earned $696,104. Had he held on and won the tournament he would have made $1.44 million,'' Packard, a CPA who specializes in tax planning and the preparation of tax returns for professional athletes, wrote on Forbes.com. ''He cost himself $743,896 in prize money by failing to close the deal on Sunday. Maybe Mickelson can take solace that he saved $76,100 in California income taxes?
''In November, the voters in Mickelson's home state chose to increase the nation's highest tax rate from 10.3% to 13.3%,'' Packard explained. ''California's tax on the difference between first and second place prize money would have amounted to about $98,900. Pennsylvania's 3.07% tax on the difference (roughly $22,800) would have been taken as a credit on his California return to avoid double-taxation. Thus the net California tax difference between Mickelson's first U.S. Open victory and yet another second would have been $76,100.''
But that's not all, Packard notes. Mickelson's bonuses from his sponsors – including Callaway, Barclay's, KPMG, Exxon Mobil, Rolex and Amgen – would have added up to about $2.5 million, according to a Forbes estimate. And that would have triggered an additional California tax bill of more than $300,000.
Adding in his tax savings from the prize money, and Mickelson likely saved $400,000 in California taxes alone (federal taxes would have eaten up another $1.3 million or so), he said.
Mickelson was spared the angst of paying an even higher tax bill, Packard said. But, he notes – and no doubt we all agree – ''something tells me he would have happily written the check to take home the trophy he covets.''
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