Richard Sherman, acting as his own agent, successfully negotiated a contract with the San Francisco 49ers. Will others follow his example?
As the new tax law in the United States, along with its ramifications for professional sports teams and athletes, continues to be revealed, San Francisco 49ers defensive back Richard Sherman may become a trendsetter.
Although Sherman’s effectiveness at getting a maximum contract may be questionable — his signing bonus with the 49ers was a mere $3 million — the money he saved by acting as his own agent may make up for what he wasn’t able to get from San Francisco.
Prior to the passage of the tax revisions in 2017, professional athletes could deduct fees they paid to their agents for negotiating their contracts from their federal income taxes. That’s no longer the case.
While percentages that agents are paid is largely not regulated, and depends on the contract between each athlete and their agent, it can amount to millions of dollars for the athletes who are able to earn the most lucrative deals. It might be difficult for agents to continue to demonstrate their value at that rate given the fact professional athletes can no longer count upon deducting that amount each year.
As Robert Raiola pointed out, fees paid to agents for securing endorsement deals are still deductible, however, and that’s how creative agents could still keep their percentages while allowing athletes to avoid a spike in taxes paid to the federal government. Fees for the agent paid by the athletes could be shifted toward that side of the relationship, but that work-around would be only for those athletes who are able to land endorsement deals.
A lot of players may lack the knowledge necessary to act as their own agents, but at a potential savings of millions of dollars when it comes time to negotiate contracts with teams, they may now find it worthwhile to learn.