01 Jan Ben Askren offers advice to fighters on taxes and the financial pitfalls of an MMA career
Following his win at UFC on ESPN 12 this past weekend, Mike Perry said that it felt like he didn’t even fight for “minimum wage” after paying all the taxes he owed.
In fact, Perry has previously addressed his money issues after fighting Vicente Luque in Uruguay last year and afterwards he claimed he made $58,000 to show and after paying international taxes, management fees and taxes from 2018, he was left with just $6 in the bank.
After hearing from Perry on Saturday night, retired UFC welterweight contender Ben Askren chimed in with a tweet where he warned other fighters that taxes could run anywhere between 30 to 50 percent of the money they earn and all of them should “plan accordingly.”
Ben Askren and Eddie Alvarez are offering up some financial advice in light of Mike Perry’s comments regarding his tax troubles after #UFCVegas4.
While Perry is the latest, there have been other fighters caught in tax problems in the past and Askren says that’s a major pitfall of the pay system in mixed martial arts with every promotion including the UFC.
“The problem with fighters is — and I know this happened to me the first year I paid taxes and I was not a fighter, I was a wrestler and I was doing wrestling camps — I didn’t pay the estimated taxes quarterly,” Askren explained when speaking to MMA Fighting. “So when it was time for my year end bill, I was like holy sh*t I owe how much?
“Obviously, I wasn’t making huge sums of money at that time. I made a decent amount that year. These fighters are making way more and nothing is deducted from their purse. They make $50,000 — they make $50,000. There’s nothing deducted from their purse. And so I’m sure some of these guys who have no idea about the taxes they need to pay, they go ahead and spend that $50K and little do they know they probably owe somewhere between $15,000 and $20,000 in taxes depending on your state and your income level.”
As UFC president Dana White has noted on numerous occasions, fighters are considered independent contractors rather than employees, which requires a different level of attention being paid when a tax bill comes due.
While independent contractors are allowed to claim business expenses related to their jobs, there are still a multitude of taxes that have to be paid. That’s why Askren points out that a fighter making a lump sum of $50,000 might sound like a decent paycheck but the government is absolutely going to take a big bite of that.
“Independent contractors pay more in taxes because they pay both sides [Medicare and social security], I think it’s 14.2 percent,” Askren said. “When you’re employed, your employer pays half of that. But if you’re an independent contractor, you pay both sides of that up to the first $120,000 or so. Then you’re talking 7 percent of $120,000, that’s like an extra $9,000 in taxes you’re paying that normal people don’t pay.”
Another problem fighters may face when advancing in their careers and making more money is the additional taxes owed.
“Maybe one year you make $40,000, you’re in a very low income tax bracket and you probably have a lot of write offs to cover that,” Askren said. “Then next year maybe you get a new contract or you get a knockout of the night bonus and you make $150,000 instead of the [$40,000] you made in the year previous, then damn that’s going to be a whole lot of taxes cause you’re in a new income bracket now.”
Beyond taxes, Askren also believes fighters need to start planning for the future now while they are competing because the paychecks earned from promotions like the UFC may have to provide for them for years to come.
In Askren’s case, he opened a number of wrestling academies during his career that have provided him financial stability now that he’s retired from fighting. He also made investments that will continue to pay dividends for years to come.
Other athletes like Daniel Cormier have opened restaurants while many fighters open gyms and capitalize on the skills they’ve attained to then pass onto the next generation of athletes.
Whatever it might be, Askren believes all mixed martial artists need to start looking ahead or they’re going to be stuck in a perpetual loop where fighting is all they have and it’s the only way they can make a living.
“As an adult, you also have to look out for your future cause otherwise you get caught in this trap where you can literally never leave,” Askren said. “Because if you’re used to making ‘X’ amount say $200,000 a fight and those are guys that are getting paid very, very well. So you’re getting paid $200,000 a fight and they have no external income, like they don’t develop any skills and they step away from that $200,000 a fight, which is let’s say resulting in half-a-million dollars a year and get used to living on half-a-million dollars a year and they don’t save up.
“I gave myself a three to five year window, a runway where I could grow my businesses and everything else to where I could live very comfortably without tightening the belt.”
Saving money along with investments allowed Askren to comfortably retire from fighting without worrying that he’d be broke inside the next year.
“Give yourself a runway and have other things that you’re doing,” Askren said. “That’s kind of how they have to think about it. Yeah, I made probably close to $1 million last year when you include everything. I’m not going to make that any time soon but I feel like I made the right investments and I saved enough of it to where I have a runway where I’m making a pretty good living and I’m going to continue developing my businesses and grow other things I’m doing as well.
“Not just investments but find other skills. Because even if you have enough money, you’ve got to do something or you’re going to be bored as sh*t. Literally find another job, find a skill, find a hobby, find something you’re passionate about and use your notoriety that you have while you’re fighting to develop that business or that hobby or whatever it is.”
Obviously every fighter competing in the UFC or Bellator or other major promotions make different amounts of money, which will then drive how much they can save or invest.
If nothing else, Askren offers one piece of advice to all athletes across the sport when it comes to money, taxes and a future that isn’t spent in poverty.
“Jon Jones had a tax lien on him [Donald] Cerrone’s had a tax lien on him. James Toney had a tax lien on him. This is not totally new,” Askren said. “This is not a brand new thing whatsoever.
“I would say just hire people who actually have your best financial interest in mind. That’s kind of hard to find sometimes. Obviously, I think you have to have a basic amount of information yourself so you don’t get taken advantage of.”