Rory McIlroy to lose millions in prize money after Masters triumph | Golf | Sport

Rory McIlroy will be forced to hand over a substantial portion of his Masters prize money after his triumph at Augusta National. The 36-year-old successfully defended his title on Sunday, joining the elite company of Jack Nicklaus, Nick Faldo and Tiger Woods.

The Northern Irishman appeared destined for a comfortable victory after building a six-shot advantage at the close of Friday but gradually watched his challengers close the gap over the weekend. In the final round, McIlroy maintained his composure to card one-under-par and secure the prestigious Green Jacket, finishing one stroke ahead of Scottie Scheffler. Following his career-defining breakthrough a year earlier, the six-time major champion managed to narrowly avoid another playoff. Back-to-back Masters victories further cement McIlroy’s status as one of the finest golfers of his era. He received the £3.36million ($4.5m) winner’s prize after successfully defending his Masters crown. However, the two-time champion could surrender more than a third of his earnings in tax.

“The tax position of an international sports person largely depends on where they are resident (i.e. in which country they pay their taxes) as well as where they perform the activities generating the earnings,” Jon Elphick, Managing Tax Partner at accounting firm Band, explained. “Typically, a level of local tax will be paid where the event takes place, but additional tax may then be due in the country the sports person lives. Most countries apply a system of marginal taxes, with the rates increasing as a person’s income increases.”

Applying those factors to the Masters prize money, Elphick continued: “The Masters takes place at Augusta National Golf Club in the US state of Georgia. The US tax system charges ‘federal tax’, a national tax applied on all US source earnings and all US nationals on worldwide income, and ‘state tax’ payable on earnings generated within specific states.

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“The highest rate of federal tax is charged at 37 per cent, whilst state income tax in Georgia is currently charged at 4.99 per cent, meaning a total tax rate of 41.99 per cent will be applied in the US on the Masters winnings, and so US tax of up to $1,511,640 (£1,127,040) would be payable by the winner.”

McIlroy previously resided in Florida but has since purchased a property in Wentworth, Surrey. Before the Masters concluded, Elphick outlined how a UK resident could be taxed more than an American champion.

“Whilst US tax will be paid on the winnings, the winner may be tax resident outside of the US, meaning they could have local taxes to pay in additional to that, depending on where they live (note that nationality isn’t typically important, but where the person lives as a tax resident),” he said.

“A US winner’s tax liability will be limited to the tax paid in the US, whereas a UK resident winner would be liable to pay UK income tax at a likely rate of 45 per cent on the winnings as well (a liability of $1.62m).

“In this case, the UK tax would be reduced by the amount of tax paid in the US in order to avoid a “double tax charge”, so a UK winner would pay over $1,511,640 to the IRS in the US, and an additional $108,360 (£80,790)to HMRC in the UK).”

The combined weight of both US and UK taxation would leave McIlroy facing a total bill of £1.2m ($1.62m), based on those figures, which would account for 36 per cent of his Masters prize money. However, that is hardly likely to dampen McIlroy’s spirits after celebrating his victory with his loved ones at Augusta.

“It was a tough weekend but I’m so happy to hang in there and get the job done,” McIlroy said in his winner’s speech. “I wanted to come back and prove last year wasn’t a fluke.”