As of Wednesday, August 10, Team USA has won 27 medals at the Olympic Games in swimming, gymnastics, shooting, judo, archery, and cycling. China and Japan trail behind with 17 and 14 medals, respectively.
After the pageantry of the 31st Olympics ends in Rio de Janeiro, some US medal winners will return home to a harsh reality. Many of them will owe the Internal Revenue Service thousands because of the cash prizes associated with their medals.
The US Olympic Committee awards gold medal winners $25,000, silver medals $15,000, and bronze medals $10,000. The IRS considers Olympic prize money a source of income for these athletes, as opposed to a gift.
According to Americans for Tax Reform, a gold medalist from Team USA could end up facing a tax bill of $9,900 per gold medal, $5,940 per silver medal, and $3,960 per bronze medal. Although these are the maximum amounts an athlete could pay, it largely depends on their individual tax brackets.
This caused Senator Marco Rubio (R-FL) to introduce the Olympic Tax Elimination Act during the London 2012 Olympics. The objective of the bill was to change the IRS code so that the gross income of US medal winners “shall not include the value of any prize or award won by the taxpayer in athletic competition in the Olympic Games.”
Rubio’s bill never gained any traction, and in 2014, Congressman Blake Farenthold (R-TX) introduced a similar proposal that also never passed.
Unless athletes have a substantial sponsorship, most can’t rely on their sport alone to support them.
In fact, according to a study from the US Track and Field Athletes Association, about 50 percent of athletes who “rank in the top 10 in the USA in their event make less than $15,000 annually from the sport.” This total includes sponsorships, grants, and other prize money.
But the IRS doesn’t just bill Olympic athletes. According to the agency’s website, “cash earned from side jobs, barter exchanges of goods or services, awards, prizes, contest winnings, and gambling proceeds” all must be reported as income by taxpayers.
Our current tax code clearly disincentivizes hard work. Is it right for our Olympic athletes to train for years in a skill and represent our country on a global stage, only to be hit with a giant tax bill when they come home?