The Summer Olympics in Rio de Janeiro recently concluded and many Americans took home gold, silver, and bronze medals. To be precise, 46 gold, 37 silver, and 38 bronze medals were won by American athletes. But not only were U.S. athletes like Michael Phelps and Kevin Durant raking in the gold in Brazil, so was the U.S. Treasury Department and the Internal Revenue Service. Yes, big surprise, the U.S. government has a stake in the Olympics as it taxes Olympic winnings as income.
What the average American may not know is that the United States Olympic Committee awards cash for each medal won by an Olympic athlete. Michael Phelps received $25,000 for each of the five gold medals that he won. Winning a silver medal in the 100 meter butterfly garnered $15,000 for Phelps. Had the unthinkable happened and Phelps would have won only a bronze, he still would have “cashed it in” for $10,000.
But these cash awards are not the only element of winning an Olympic medal taxed by the IRS, the actual value of the medals is as well. Because an Olympic athlete receives income in the value of the medal itself, the IRS taxes it. 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.
Not every Olympic athlete has the ability to make a living like Michael Phelps through million dollar endorsement deals. Taxes on Olympic winnings often burden young Olympians, who generally put in long hours living a one-dimensional lifestyle, tempered by some form of financial insolvence. This economic stress is only increased by the fact that the United States is one of only a few countries that does not provide government funding for Olympic athletes, who instead rely on funding from the U.S. Olympic Committee and other private sources.
If you 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.
