Winning a gold medal has a downside.
U.S. athletes competing in the 2016 Olympics will have to pay state and federal taxes on the value of every medal they win, as well as on the cash bonus they receive with each medal. The U.S. Olympic Committee (USOC) awards American athletes $25,000 for a gold medal, $15,000 for silver and $10,000 for bronze.
Like any prize winner, from a lottery winner to a Nobel Prize recipient, U.S. athletes are taxed because Olympic medals and cash bonuses are considered income. Based on the top tax rate of 39.6% for the nation’s highest earners, the maximum possible “victory tax” on medal bonuses is $9,900 for each gold medal, $5,940 for silver, and $3,960 for bronze. In addition to their cash bonuses, Olympians have to pay tax on the value of the medal themselves – about $594 for gold, $305 for silver, and bronze is worth a negligible amount so it’s not taxed. Athletes in lower tax brackets would owe less.
Taxes are yet another burden for Olympians – the majority of whom are already struggling to get by. The U.S. is one of the only countries that does not provide government funding to its Olympic athletes. And while some lucky Olympians land lucrative endorsement deals, most of them rely on small stipends from the USOC, support from local businesses or supplemental income from a day job.
In recent years, Congress has made attempts to give Olympic athletes a tax break on their winnings, although they have not yet had any success. A recently proposed bill would make “the value of any medal or prize money” awarded during the Olympics or Paralympics exempt from income taxes. The bill was passed by the Senate in July and is currently being considered by the House. If passed, the new bill would apply to earnings from January 1, 2016 to January 1, 2021 – which would include this year’s Olympics.
“Our Olympian and Paralympic athletes should be worried about breaking world records, not breaking the bank, when they earn a medal,” said New York Senator Chuck Schumer, a primary sponsor of the bill attempting to eliminate taxes on Olympic and Paralympic athletes. “Most countries subsidize their athletes; the very least we can do is make sure our athletes don’t get hit with a tax bill for winning. After a successful and hard fought victory, it’s just not right for the U.S. to welcome these athletes home with a tax on that victory.”
As for one of America’s greatest athletes, Olympic swimmer Michael Phelps’ maximum tax bill for the 2016 Games would be about $55,440 for his five golds and one silver. Although I’m sure he’s not sweating it – his net worth is a whopping $55 million, according to Celebrity Net Worth.