Olympians Earn Taxable Income Too
Posted by: Brookside Admin
The Olympics are coming to a close and many American athletes are bringing home medals rewarding them for all of their hardwork. They also receive handsome monetary rewards for their success from the US Olympic Committee. The downside to any big, cash prize, even one from a prestigious event like the Olympics, is that the IRS must claim its share.
So, while US athletes will return from Rio to much fanfare, many of them will also return to a sizable tax bill. Here's a look at what that might look like, and the debate over whether taxing Olympic athletes is a practice that should continue.
An American athlete that earned a gold medal in any event at this year's Olympics will also receive a $25 thousand cash prize from the USOC. They also dole out $15 thousand for each silver, and $10 thousand for each bronze.
For an athlete with a relatively normal income, for example one competing in an event without a professional domestic league, and without much sponsorship money available, may not owe as much of that cash prize to the government.
An athlete like Michael Phelps, however, whose net worth is estimated at $55 million, could owe nearly 40 percent in taxes for his medal haul. His 5 gold medals and one silver earned him $140 thousand from the USOC. His tax bill for those medals could be as high as $55 thousand.
His record breaking performance in the 2008 Olympics in Beijing resulted in eight gold medals. The monetary reward for those was taxed at about a 35 percent rate, which resulted in a tax bill of $70 thousand.
The medals themselves are even taxable, but don't hold near the value of the cash prize.
In 2012, legislation was introduced to the US Senate to give Olympians a free pass and allow them to keep all of their winnings. That bill, however, was defeated.
A slightly altered version of that bill was reintroduced to the Senate recently and passed, and is now awaiting approval from Congress.
It seems unlikely that even if the bill is approved by Congress, it would take effect soon enough to help the athletes who competed in Rio this year.
For many of them, their cash prizes after taxes could be reduced to $15,100 for gold, $9,060 for silver, and $6,040 for bronze. Still an impressive prize for each athlete, even after the IRS takes its share.
You may not be an Olympic athlete, but you likely still have questions about taxes for your personal income or your business. Contact the CPAs at Brown Kinion and Company at our offices in Broken Arrow, and Tulsa / Bixby for help.