For the teenagers competing in the Fortnite World Cup, filing taxes could have seemed like a foreign concept.
Even if players had to deal with some tax work from an odd job or a deal with an esports organization, having to pay back a significant amount of winnings can feel brutal.
When Bugha won the Fortnite World Cup he won a well-publicized prize of $3,000,000. But that prize falls under the American tax system’s highest tax bracket of 37%.
That means that every dollar he earned over 500,000 was taxed at 37%. Here’s a simple breakdown of American tax brackets, for simplicity sake we are going to say his entire prize was taxed at the top bracket. In reality, he will have about $30,000 extra after taxes.
After Uncle Sam collects, Bugha will be down to $1,890,000. A big drop, but not the worst thing in the world. But taxes aren’t done yet, because the tournament was held in New York, the richest state in the nation, they have one of the highest tax rates at 8.82%.
That takes off another $275,000. Now he’s down to $1,615,000. Hey at least it’s still over half. Fortnite World Cup runner-up Psalm was on Fox Business Network to talk about how he is dealing with the taxes that cut his $1.8 million to just over $900,000.
But now lets go back to Bugha, because people arent done coming for his cash. Next up: Sentinels. Bugha was a relatively unknown player coming in to the event, he didn’t have any big finishes at the time of the signing and Sentinels signed him before he had even qualified for the Fortnite World Cup. So when signing a deal, Bugha was probably happy to trade a percentage of future prize winnings for a steady salary.
According to reports in the community, Bugha’s deal signs over 20% of his winnings to the organization. It isn’t clear if that percentage is taken out pre-tax or post-tax so we can calculate both.
Total winnings if Sentinels percentage comes pre-tax: $1,015,000
Total winnings is Sentinels percentage comes post-tax: $1,292,000
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It’s a brutal wake-up call for the young star. even if you win the biggest individual prize pool in esports history, you still need to keep the government happy.