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U.S. Athletes Win an Olympic Medal in Sochi, Pay Taxes in America
As the 2014 Winter Olympics came to a close over the weekend, medal winners from around the globe may be facing an increase in their taxable income. The U.S. Olympic committee awards cash prizes to medal winners--$25,000 for gold, $15,000 for silver, and $10,000 for bronze. Awarding cash prizes to medal winners is a common practice among countries. But what happens when Olympians are taxed on their winnings?
As the 2014 Winter Olympics came to a close over the weekend, medal winners from around the globe may be facing an increase in their taxable income. The U.S. Olympic committee awards cash prizes to medal winners --$25,000 for gold, $15,000 for silver, and $10,000 for bronze. Awarding cash prizes to medal winners is a common practice among countries. This Business Week article has a chart comparing countries and the amount of money they offer for gold, silver, and bronze medals. Kazakhstan provides the most money for a gold medal at $250,000 whereas the U.K., Norway, and Sweden provide no compensation to medal winners. Money paid to U.S. Olympic athletes is considered earned income abroad and is subject to IRS taxation—as much as 39 percent, depending on the marginal-income tax bracket into which an Olympian falls. For a gold medalist, in the 39.6% tax bracket, he or she will have $9,900 added to their tax bracket. The U.S. was awarded 28 medals in Sochi, including 9 gold medals. Efforts to curb the taxation of Olympic winnings popped up both during the Sochi Olympics and the London Summer Olympics in 2012. This year, Rep. Blake Farenthold, R-Texas, reintroduced the Tax Exemptions for American Medalists, known as the TEAM Act, which would exempt U.S. Olympic athletes from paying taxes on any medals and prizes they win. While it’s unlikely that this proposal will go anywhere, State Sen. Julie Morrison, a democrat from Deerfield, Illinois, successfully passed a bill through a state Senate committee that would offer Olympians from Illinois relief from the state’s 5 percent flat income tax. Her bill would create a state tax deduction in an amount equal to the value of any medal awarded in, or any prize money received from the U.S. Olympic Committee on account of competition in the Olympic Games. Proponents of a tax break for U.S. Olympic medalists say that to thank Olympians for representing our country, the least we can do is offer a tax break on their winnings. Those opposed say that Olympians should not be used as pawns in the debate about tax system reform.
What are your thoughts? Should Olympians pay income tax on their winnings?
These free resources should not be taken as tax or legal advice. Content provided is intended as general information. Tax regulations and laws change and the impact of laws can vary. Consult a tax advisor, CPA or lawyer for guidance on your specific situation.
