The Olympics should be a time for excitement and great honor. But for the US Olympians who win medals, it’s a time for major tax obligations.
For winning a gold, silver or bronze medal, the Olympians get paid $25,000, $15,000 and $10,000 respectively. This, of course, is income and will be taxed as such under §74 Prizes and Awards which provides:
“prizes and awards, other than certain types of fellowship grants and scholarships and limited employee achievement awards, are generally includible in gross income.”
The Olympians also get taxed on the fair market value of the medals as well. The medal is valued when it is earned, not after, so the Olympians were lucky this year in Rio since the value of medal is lower than recent years. The value of the medals is $564 for gold, $305 for silver and close to nothing for the bronze. Putting the Olympians in the top tax bracket would mean a 39.6% tax on their winnings:
- Gold = $9,900
- Silver = $5,940
- Bronze = $3,960
In recent months and with the Rio 2016 Olympics having just occurred, the Senate has passed a bill that was introduced by Senator Schumer to exempt the Olympian winners from taxation. However, since July, the House has not moved on the bill.
Nonetheless, most athletes can deduct the cost of training, travel and their equipment from their taxes, if they consider this job their business. Under §162 Trade or Business Expenses it states that deduction is allowed for necessary expenses paid during the tax year, which includes the training and travel that the athletes must endure in order to be successful. Athletes, like Simone Biles, who won four gold medals and a bronze, could face around a $44,000 tax bill. However, her endorsements and many other athletes like her such as Michael Phelps and Kevin Durant who are millionaires, can afford these taxes. Although this seems like a crazy concept to tax our Olympians on their accomplishments, it makes sense to since these are prizes and awards and the medals are worth actual money.
By: Rachel Winter, Alfred University, MBA Accounting 2017