Gold, Silver and Bronze, the medals of a winner. However, these prizes come with their costs. With the closing of the Summer games in Rio de Janeiro this past Sunday, it now comes the time for Olympic Athletes to prepare for the taxes they will pay on their winnings. Many of us overlook the fact that Olympic Athletes are earning their income as they compete. For every event they win first, second, or third place they get medals and prize money. The prize money and the value of the medals have their tax implications. That is right even winning a medal of Gold, Silver, or Bronze, requires a tax return, it is a prize for both the athlete and Uncle Sam.
Olympic Athletes that win medals are taxed on both their cash award and medal asset value. Cash awards for the 2016 olympics are:
- $25,000 for Gold
- $15,000 for Silver
- $10,000 for Bronze
While this may seem like a well earned prize, the IRS can take as much as 39% of their Olympic prize earnings. This taxable amount varies depending on many factors such as endorsement income, and other factors. Olympic athletes may have to pay in taxes as much as:
- $9,900 per Gold medal.
- $5,940 per Silver medal
- $3,960 per Bronze medal
Now let’s look at how this would affect the most decorated athlete of the Olympics, Michael Phelps. In this year’s summer games Michael Phelps has taken home 5 Gold medals and 1 Silver Medal. Depending on his total annual income and other factors he can be taxed at as much as $55,000 for his five golds and one silver (if he is taxed at the maximum tax rate).
Olympic athletes generally are not the highest paid athletes comparatively, and the taxes associated with their win, can sometimes make it feel more like a financial loss. Especially since they spend so much time and money training for a competition that occurs only every 4 years, which has prize money much below an NFL, NBA, or MLB athlete’s annual salary. For this very reason, the US government has sent a bill, which passed the Senate and is awaiting the House approval which will give Olympic Athletes exemption from taxes on their winnings in the Olympics. If this bill is approved by the House of Congress, it will afterwards await Obama’s signature before getting approved officially. Whether or not this bill be applied to this year’s summer games we cannot say, but we do know that if this bill is passed it will make that Gold, Silver, and Bronze medals all the more glorious for these Olympians who put their heart and soul into winning them.
For the rest of us, winning prizes whether locally or abroad prize money and prize and/or medal asset values would be taxable at their estimated value. Also remember that Taxable Benefits come in different forms than just cash. You can be taxed on Asset values, benefits and items other than income. As an example, prizes and non cash benefits received are still taxable which will cost you cash. Sorry Uncle Sam will not accept any exemptions, until the bill discussed above is passed. However, as of now this bill will only apply to Olympians, so the rest of us will still be paying taxes on our winnings.