The results are in and U.S. Olympic athletes won an impressive 121 medals at the Rio Olympic Games. The U.S. Olympic Committee awards $25,000 to gold medal winners, $15,000 to silver medal winners and $10,000 to bronze medal winners, which adds up to a significant windfall for athletes who won multiple medals and/or were part of a team winning a medal. In addition to the cash awarded for winning a medal, some athletes get additional cash awards from the U.S. organization for their sport. What’s more, some athletes may also attract significant endorsement deals from companies.
So what do U.S. Olympic athletes need to know about their winnings from a tax perspective? Whatever the athletes receive is subject to federal income tax as well as possible state income tax, depending on the state involved. The federal income tax rate on an athlete’s Olympic winnings could be as high as 39.6 percent for a single U.S. athlete with taxable income over $415,050 or as low as 15 percent for a single U.S. athlete with taxable income between $9,275 and $37,650 in 2016. Even the value of the medal is technically subject to tax, with a value ranging from around $600 for a gold medal to $5 for a bronze medal, although the IRS has not been known to be actively pursuing the taxation of the medal itself, unless it is resold for a profit.
Additionally, professional athletes can fully deduct for tax purposes the training costs they incurred in preparing for the Olympics, and they can even have a tax loss if those costs exceed the value of their winnings. Amateur athletes are more limited in what they can deduct, and they cannot deduct costs in excess of their winnings.
Congress has proposed an exemption from tax for the value of the medal and the payments from the U.S. Olympic Committee. Legislation has passed the Senate and is expected to be taken up by the House in September, 2016. The legislation, if passed in its present form, would be retroactive to cover medal winners from the Rio games. However, the legislation would not provide an exemption for endorsement deals.
Medal winners returning from the Rio games, after participating in their hometown parades, may also want to sit down with their hometown tax advisor to make sure that the glory they experienced after Rio is not diminished by an IRS audit. Here’s an infographic that summarizes the tax issues that winning U.S. Olympic athletes must consider.