As the world is struck by Olympic fever, we stand in awe of the commitment these athletes have made to become the best of the best. Have you ever wondered, is that Olympic gold medal taxable? The medal is considered a prize, and the U.S. taxes the value of prizes.
Some may think paying tax on a gold medal is a small price to pay for the glory, but others believe that these athletes have given enough through their sacrifices on the road to the gold. Congress has debated the matter and has finally introduced legislation that may make the value of Olympic medal or prize money exempt from Federal taxes. But how much tax are we really talking about here?
First, you may be surprised to know that the value of a gold medal is actually less than $600. It is made almost entirely of silver. The U.S. Olympic Committee also gives cash awards of $25,000 for gold medals, $15,000 for silver and $10,000 for bronze. So even for a gold medal, the value received would only be around $25,600. But would that full amount be taxable?
That $25,600 is gross earnings. The athletes can deduct any related expenses they paid in the current year. They would have paid for equipment, trainers, travel fees, facility rental fees. Some may have their expenses subsidized by sport groups, but rest assured that there will still be expenses that weren’t reimbursed, especially those incurred before they won their spot on the Olympic team.
Now consider, especially in America, those gold medalists could be in for an even bigger pay day with highly lucrative endorsement contracts. That $25,600 award is just the first drop in a very large bucket. Even if congress moves forward with making Olympic prize monies exempt from federal taxes, the monies made on the endorsement contracts will still be taxable income. The government will still share in this windfall, likely in a big way.
The potential tax on these endorsement contracts makes the debate about taxing the Olympic prize itself seem trivial. The question of exempting the actual award seems more a question of acknowledging the sacrifice and prestige that the athlete gains our country, than a question of the monies themselves.
There is no doubt that America loves her gold medalists. And apparently the IRS does too.
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