Law Gives Tax Breaks To Olympians and Paralympians
As fall of 2016 commenced, many Olympic and Paralympic athletes received good news as President Obama signed a bill which allowed these athletes an exemption from income taxes. The Joint Committee on Taxation’s cost analysis estimated that the bill would cost the government $3 million in lost tax revenue over the next 10 years, which is hardly significant. The bill is retroactive so that it applies to medals won during the Rio Olympics.
Many Americans took home gold, silver, and bronze medals from the Summer Olympics in Rio de Janeiro as 121 medals were won by American athletes. Members of the U.S. Olympic team were paid $25,000 for each gold medal, $15,000 for each silver medal and $10,000 for each bronze medal.
Not only does the new law apply to Olympic athletes, it also applies to Paralympic athletes. Members of the U.S. Paralympic team win $5,000, $3,500 and $2,500 for each medal, respectively. However, prior to the new law, they were taxed on these winnings.
Only one congressman, Jim Himes (D-Conn.) voted against the bill (the vote was 415-1), “I voted against the bill because it’s bad policy,” It makes an unpaid-for carve out, is most likely to benefit the richest athletes and further complicates an already complex tax code.” To deal with these concerns, an amendment adopted in the Ways and Means Committee prevents the tax exemption from applying to athletes who make more than $1 million a year.
President Obama hosted the U.S. Olympic and Paralympic athletes at the White House on September 29. While the president did not mention the new legislation in his official remarks, he noted that many athletes balance their training with other commitments. “We admire your athleticism, but we also admire your character and your stick-to-it-ness,” he said. “We know you don’t do this for the money or the fame. So many of you, you’re holding down a full-time job or you’re going to school at the same time, and then you’re trying to find time for your families, contribute to causes.”
Prior to the law, the IRS also taxed the actual value of the medals in addition to the prize money awarded to each winner. A gold medal is worth approximately $564; a silver medal is worth $305. The value of a bronze is considered negligible and therefore not taxed.
Most Olympic athletes don’t have the ability to make a living like Michael Phelps through million dollar endorsement deals. Taxes on Olympic winnings often burden young Olympic athletes, who generally put in a never-ending stream of hours living a solitary lifestyle, further characterized by some level of financial stress. This economic hardship is only increased by the fact that the United States is one of only a few nations that provides no level of government funding to Olympic athletes, who instead rely on funding from the U.S. Olympic Committee and other private donors.
If you have questions about any tax-related issue, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.