We all know winning a medal at the Olympics comes at a price and we normally think of that price as hard work and dedication. In this case, it’s the taxes America’s victorious athletes can expect to pay when they return from the London games.
Medals and prize money are both currently subject to income tax, according to the Americans for Tax Reform.
A gold medal, which is worth $650, according to CNN, could cost athletes about $236 in taxes. While a bronze metal, which is worth $5, could only cost an athlete $2 in taxes
Athletes will also be taxed on the cash bonuses given by the U.S. Olympic Organizing Committee, which are much more substantial than the cost of the medals.
The U.S. Olympic Organizing Committee will award London champions $25,000 for a gold medal, $15,000 for silver and $10,000 for bringing home a bronze, Reuters reports.
At a 35 percent income tax rate, bronze medalists will owe the IRS a total of $3,500, silver medalists will owe $5,250 and top finishers will be liable for $$8,750.
Of course, many high-profile athletes will also come home to lucrative sponsorships offers, also all taxable.
For example in 2008, Michael Phelps earned a $1 million bonus from Speedo, which he donated to charity. This summer, Phelps’ teammate and primary competition Ryan Lochte could earn even more from ads for Gatorade, Gillette and other sponsors.
But American athletes aren’t the only Olympians vying for the gold — or big prize money.
Though Malaysia has never won a gold medal in an Olympic Games, Andrew Kam, the owner of a gold mine and the Kuala Lumpur Racket Club, will award a 12.5 kilogram (27.5 pound) gold bar (market worth $630,000) to any badminton player who wins gold (someone should have told the badminton players who purposely tried to lose).
A recent Yahoo! Finance story also notes that during the 2010 Winter Olympics, Russians received $135,000 for gold medals and $54,000 for bronze.
There had been controversy leading up to London Games regarding Britain’s stringent tax laws, which ordinarily take a large cut of the global income of any international athlete competing on its soil.
Worried the policy would discourage participation from Olympic superstars like sprinter Usain Bolt, who has previously criticized the law, British taxing authorities agreed to an exemption for London 2012 Olympic athletes.
Thankfully, Senator Marco Rubio (R- Fla.) introduced a similar bill to Congress on Wednesday that would exempt Olympic winners from taxes on prizes received at the London games, as our victorious athletic representative justly deserve.
JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.