Tennis stars and taxes: If Djokovic lives in Monaco (no income tax) but wins US Open, does he pay IRS taxes or keep winnings tax-free?

8 As someone who works with cross-border tax issues, I can tell you that athletes like Djokovic would indeed pay US taxes on US-sourced income regardless of where they live. The US taxes nonresidents on income earned within its borders. When a foreign athlete competes in the US Open and earns prize money, the US will tax that income. The IRS typically withholds around 30% of their US earnings right off the top. This is true even if the athlete lives in a tax haven like Monaco. What makes this interesting is that the athlete's home country might have a tax treaty with the US that could reduce this withholding rate, but since Monaco has no income tax, there's no double taxation to avoid and no treaty benefit to claim. So the athlete would pay the full US tax on their US winnings, but wouldn't owe additional tax to Monaco.

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2 Monaco specifically has tax treaties with France but not with the US. So someone like Djokovic would definitely pay US taxes on US tournament winnings. The no-income-tax benefit of Monaco only helps them with worldwide income that isn't specifically sourced to a country with territorial taxation like the US. Tennis players have it rough tax-wise because they compete in so many different countries. Each tournament's prize money is usually taxed by that country. Some players end up filing tax returns in 15-20 countries each year!

6 Does anyone know if players can deduct expenses against their tournament earnings? Like if Djokovic flies private to the US Open, stays in expensive hotels, brings his coach and physical therapist - can all those costs offset the taxable prize money?