When you earn income in the United States, that income is generally subject to U.S. tax, regardless of where you live or which team you play for. Who actually pays that tax, and how much, depends on the structure of the prize money and player bonuses.
Why the $50 million isn’t as taxable as it looks
Start with where the money went. FIFA paid the $50 million to Spain’s football federation, not directly to the players or staff, and the federation decides how much to pass on as bonuses.
That distinction mattered this year, because FIFA had been pressing U.S. officials for a tax break. The U.S. Treasury agreed that the 48 national associations could apply for tax-exempt status under section 501(c)(3) of the tax code — the slot normally reserved for charities — which can remove federal income tax on their tournament income. So most of that $50 million check can largely escape federal tax.
But the players don’t get the same treatment. “At the individual player level, there is no exemption,” Mina Capouet, a senior legal analyst at Wolters Kluwer, told Accounting Today. Once Spain pays its squad a share of that prize for matches played in the United States, those payments count as U.S.-source income, and the IRS withholds 30% off the top before the player can claw any of it back through a treaty or a tax return.
The 30% default, and the treaties that soften it
Under the default rule, a foreign athlete’s U.S. earnings get 30% withheld off the top, before any expense is deducted, and the payer sends that straight to the IRS.
Tax treaties can reduce that amount. Spain’s players, most of them tax residents in Europe, can use agreements like the U.S.-Spain tax treaty to cut or even remove the federal share — but only if they file the right form first (a Form 8233 or a W-8BEN) and have a U.S. taxpayer ID.
Higher earners have another route: a Central Withholding Agreement, or CWA that lets the IRS withhold based on estimated net income at normal graduated rates instead of taking 30% of everything up front. The catch is timing. You have to apply at least 45 days before your first U.S. game. If you miss that window, the 30% default applies.
Either way, players still file a U.S. tax return after the tournament, which is when anyone who had too much withheld can try to claim money back.
Where the treaties stop
Treaties only reach federal tax, and there are two major exceptions. The first is state tax. Even if a player’s federal bill is reduced to zero, he can still owe tax to the state where he played, because states like New Jersey do not follow federal treaties. The final was in New Jersey, where the top income-tax rate is 10.75%.
