Safe Harbor Withholding: 2025 Edition

How to Let Your Tax Payment Make You Money When Your Salary Jumps

“Be the bank to the government.”  That’s the heart of this strategy. Instead of handing over every tax dollar the moment you earn it, you keep most of it working for you—then cut the IRS a single, on‑time check next April. Sounds great, and it is great—if executed appropriately.

1. Why 2025 Is the Perfect Storm for a player like you

• Short‑term yields are meaningful. Three‑month Treasury‑bills sit around 4.2 %.
• Salary increases are everywhere:
  • MiLB 40-man AAA salary rises to $62 k.
  • MLB minimum climbs to $760 k.
  • First‑year arbitration deals can come in near $4.3 M.
  • Mid‑tier free agents are locking up $10‑12 M AAV.

• Safe‑Harbor hasn’t moved: Pay 110 % of last year’s tax and the IRS cannot penalize you.

2. Quick Refresher: Three Ways You Pay Taxes

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3. Three Real‑World Jump Scenarios

Story‑Time:

How the Rookie “Becomes the Bank”

1. Last year’s tax: $24,800.
2. Safe‑Harbor: 110 % → $27,280 withheld over 2025 paychecks.
3. Projected 2025 tax: $304,000.
4. Difference: $276,720 stays in your high‑yield/T‑Bill account at 4.23 %.‍
5. Result: ~$11,700 “found money.”

How the Minimum‑Salary Player “Becomes the Bank” (Min → Arb)

1. Last year’s tax: $296,000.
2. Safe‑Harbor: 110 % → $325,600 withheld over 2025 paychecks.
3. Projected 2025 tax: $1,720,000.
4. Difference: $1,394,400 stays in your high‑yield/T‑Bill account at 4.23 %.‍
5. Result: ~$58,900 “found money.”

How the Arbitration Star “Becomes the Bank” (Arb → FA)

1. Last year’s tax: $1,720,000.
2. Safe‑Harbor: 110 % → $1,892,000 withheld over 2025 paychecks.
3. Projected 2025 tax: $4,800,000.
4. Difference: $2,908,000 stays in your high‑yield/T‑Bill account at 4.23 %.‍
5. Result: ~$123,000 “found money.”

4. Execution Checklist

• Pre‑season: Have you already run a full‑year tax projection? If not, why not?
• Immediately: Tell club payroll to cap withholding at the Safe‑Harbor dollar.
• Each Pay‑Day: Sweep surplus into 3‑month T‑Bills or a money‑market fund.
• Quarterly: Re‑project for trades, endorsements, option bonuses.
• April 15, 2026: Pay the remaining balance—penalty‑free.

5. Red Flags to Avoid

• Refund last year? You over‑paid—tighten withholdings.
• State “jock taxes.” A mid‑season move to California or New York means recalculating.
• 1099 Spikes. Endorsement checks need separate quarterly estimates.

6. Conclusion

Partner with a team that lives inside the MLB tax complexity so you never leave free money on the table—and let every hard‑earned dollar keep playing offense for you. Every dollar really does matter. Stop giving the IRS an interest‑free loan and start letting those dollars play offense for you.

Ready to keep more of what you earn? Visit www.athletefamilyoffice.com to schedule a complimentary Cash‑Flow & Tax‑Timing Review.

Want a full‑service solution? AWM Capital is the ONLY Family Office built exclusively for professional athletes—combining tax strategy, investment management, estate planning, and concierge services under one roof.

Let’s turn mandatory tax payments into an opportunity to build lasting wealth—season after season.

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[1] "The information included herein this entire article is educational and general in nature and does not represent a guarantee. This article does not take in the reader's personal financial circumstances; therefore, it is not intended to be a substitute for individualized financial, legal, or tax advice. Investment returns are not guaranteed, and the investment percentage return included in the article is only an example for illustrative purposes. All investing assumes a level of risk, and this is not a financial recommendation. Please consult your financial professional before making any investment decisions.

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Citations:

1. https://fred.stlouisfed.org/series/DTB3
2. https://www.baseballamerica.com/stories/details-from-the-new-2022-2026-collective-bargaining-agreement/
3. https://www.baseballamerica.com/stories/details-from-the-new-2022-2026-collective-bargaining-agreement/
4. https://www.lookoutlanding.com/2025/1/9/24340044/mariners-avoid-arbitration-hearings-with-all-eligible-players
5. https://www.espn.com/mlb/story/_/id/42115276/mlb-2024-25-free-agency-tracker-offseason-trades-moves

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