*Taxes may be applicable
Winning an Olympic medal is an amazing accomplishment that deserves to be rewarded. The US Olympic Committee prize money for winning an Olympic gold medal is $25,000, $15,000 for silver, and $10,000 for bronze. Many countries do not award their medal winners, and if they do, the amounts are often less (though some are higher, such as Brazil). What may seem surprising is that with those thousands of dollars in prize money earned, comes a hefty tax bill, depending on the athlete’s income tax bracket. If a US Olympian is in the highest tax bracket (39.6%), then they will owe $9,900 in income taxes on his or her gold medal. This amount drops to $6,250 if the gold medal winner is in the 25% tax bracket.
US Olympians are not only taxed on their prize money, but also on the value of the materials that comprise the medals, which is $564 for gold medals, $305 for silver medals, and $4 for bronze medals. However, only the highest paid US Olympians are likely to owe taxes on their winnings, due to high-paying endorsements, pushing them into higher tax brackets. Medal winners of Team USA who are still students or have lower incomes will likely pay less income taxes on their winnings.
For the few athletes that will pay income taxes on their winnings there are a few loopholes that they can use to help them retain all of their well-deserved Olympic winnings. One way to get exempt from paying the tax on a medal is by living in a foreign country for at least 330 days of the current tax year. Whether you decide to train or vacation abroad, the IRS will allow you to exclude a certain amount of income, given that you live abroad for the required amount of time. The limits for how much can be shielded from the IRS for 2016 have yet to be announced, but US Olympians should expect this amount to be around $100,000.
Also, if US Olympic medal winners treat competing in their sport as a hobby, then they can deduct certain expenses from the income taxes on their Olympic income. Deductions for training expenses, coaches, equipment, and travel are permitted as long as there is income to counterbalance the Olympic earnings and the Olympian itemizes his or her deductions. If the athletes follow those rules, then, according to Forbes.com, the deductions are classified as “miscellaneous itemized deductions” on Schedule A, and are restricted to the total of deductions in excess of 2% of adjusted gross income.
The Senate is also working hard to help US athletes keep all of their Olympic earnings. In July, the Senate passed a bill, referred to as the Appreciation for Olympians and Paralympians Act, that would exempt Olympian and Paralympian prize money and medal values from income taxes. A similar bill is under review in the House of Representatives.
All in all, even Olympic winnings are subject to income taxes. Whether US Olympians decide to live outside of the US, consider their sport a hobby, or the US Government makes it the law to end taxation on Olympians there are ways that they can reduce their income taxes, and keep the rewards that they rightfully won. Condor Capital would like to thank all of the US Olympians for their countless hours of hard work and dedication towards representing the USA.