Sunday afternoon, one driver will be crowned IndyCar’s inaugural champion of its $1 Million Challenge at The Thermal Club – and they’ll be lucky if they pocket $100,000.

Sound weird?

It all comes down to a misleading event name and the combination of typical driver pay structures, unclear contractual language, manager fees and those pesky state and federal taxes.

Here’s an estimate on just how much the event's winner can expect to take home:

What is the purse for the $1 Million Challenge?

Yes, despite the name of the non-points weekend – and despite the race carrying IndyCar’s largest non-Indianapolis 500 purse in series history – Sunday’s 20-lap feature race on 3.067-mile track in a private community just outside Palm Springs, Calif. does not have $1 million on the line for the winner.

When IndyCar’s first non-points event since 2008 was unveiled in September, it was meant to include a component where 27 members of The Thermal Club would offer up five- or six-figure buy-ins and then be randomly paired with one team and driver for the weekend. And if their partner finished in the top-5, that member would’ve come away with an identical prize.

The grand prize: $500,000, meaning both the team and the attached Club member would have walked away from the event with half-a-million dollars – hence the “$1 Million Challenge.”

When IndyCar confirmed the rules and regulations for the event last week, that member payout component had been scrapped, though the team prizes – $500,000 for 1^st, $350,000 for 2^nd, $250,000 for 3^rd, $100,000 for 4^th, $50,000 for 5^th and $23,000 each for 6^th-27^th – remain unchanged.

But just like the Indy 500 and the multi-million paydays it advertises for its winning driver each year, only half – if not far less – of the winnings will actually make its way to the victor.

So the purse money goes to teams and not drivers?

Barring a contractual rarity where a driver has negotiated for 100% of race winnings, yes. Money earned on-track during IndyCar races goes straight to the team. Drivers are paid a cut of this as a “bonus” – the percentage of the cut dependent on their contract. According to multiple drivers, team owners and driver managers IndyStar spoke to for this story – all of whom were granted anonymity in order to speak freely about private details of their contracts – that amount drivers rake in typically falls between 30%-50% of a team's on-track earnings from a driver’s performance.

A different percentage for purse money related to Indy 500 performance often is negotiated separately, but outside that race, sources almost uniformly agreed that a 40% likely represents a rough average for the field. So immediately, if you’re the driver Sunday who prevails after a round of qualifying, a 10-lap heat race and a 20-lap feature race – that includes a halftime break after 10 laps – your cut of the $1 Million Challenge grand prize falls to $200,000.

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But what about taxes?

Ah, yes. That salary number we all agree to when we're hired isn’t ever what actually ends up in our back account. It’s no different for athletes – and for those who are making six or seven figures, it’s even worse.

A couple quick things to remember: 1) There’s a wide variance of driver income in the IndyCar paddock – from those on multi-million-dollar salaries paid by teams, to those making a couple-hundred-thousand, to those basically making living expenses or being paid by their sponsors instead of their teams; and 2) Any money here a driver makes will be on top of their salary.

For the sake of this exercise, if we presume the winner comes from the series’ top-10 most accomplished, veteran drivers (trios from Team Penske and Andretti Global, along with Arrow McLaren’s Pato O’Ward and Alexander Rossi and Chip Ganassi Racing’s Scott Dixon and Alex Palou), Sunday’s winner almost certainly already makes at least $609,350 per year (if they’re single) or $731,200 (with their spouse) to land in the top federal tax bracket.

That means any additional income they bring in is taxed at 37% - taking $74,000 off that $200,000 from their team, leaving the winning driver with just $136,000. Given that this money was made while working in California, the driver is also likely to be subject to pay California state income tax, too – at a rate of 9.3% according to California’s 2023 state income tax brackets.

That makes for another loss of $18,600, leaving our theoretical winning driver with $117,400.

And then they have to pay their manager?

As is typical in any sport, a driver’s agent or manager takes a cut from the driver’s salary, as well as their on-track earnings – depending on the deal, of course. This deduction can vary widely, with one manager telling IndyStar an agent can make 7%-18%. According to that source, some managers will take that off their driver’s gross income (before tax), while others take their cut after taxes. A separate manager said taking a cut off gross earnings was fairly normal.

To balance that, let’s say the manager for Sunday's race-winner takes 10% pre-tax for their share in their driver’s big day – making this additional payout $20,000.

All a sudden, this winner of IndyCar’s $1 Million Challenge is putting just $97,400 into their bank account – good enough to buy one of the nicest brand-new sportscars from BMW, Cadillac, Porsche or Jaguar but hardly the prize the event’s name might suggest.

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And it could be even lower than that

According to multiple IndyCar team owners and one driver manager who spoke with IndyStar, whether this weekend’s event falls within the parameters of typical driver on-track bonus structures may come down to a choice couple words in drivers' deals. One team owner told IndyStar they defined a “race” in their contracts as one “sanctioned by IndyCar” – meaning it didn’t matter whether points were awarded or not. Should one of that team’s drivers win Sunday’s 20-lap feature race, they should expect to receive whatever bonus percentage of the $500,000 they’d previously agreed upon.

A separate team owner told IndyStar said that the uniqueness of the $1 Million Challenge as a non-points-paying event left it outside what the team would be expected to pay bonuses from. That same owner, though, admitted they’d be willing to proactively offer a bonus to any one of their drivers if they landed a notable finishing spot – albeit at a much lower percentage than the typical 40%.

One driver manager IndyStar spoke to for this story said they were going into this weekend not expecting to receive any amount of bonus, no matter how their drivers performed, and said any driver with unfavorable language in their deal might only be able to hope for 20% from a good-faith boss.

This article originally appeared on Indianapolis Star: IndyCar's $1 Million Challenge will earn winning driver way less