When you think of the Olympics, and competing in the Olympics, you probably think about the prestige of competing on the world stage. These athletes, having trained for most of their lives, get a chance to showcase their abilities to the world. For many, it is the apex of athletic achievement.
Don’t worry about knowing tax rules. With TurboTax Live, you can connect with real tax experts or CPAs to help with your taxes — or even do them for you. Get unlimited tax advice right on your screen from live tax experts as you do your taxes, or have everything done for you—start to finish. So you can increase your tax knowledge and understanding and be 100% confident your return is done right, guaranteed.
As it turns out, in addition to fame there is a little fortune as well!
Each country has an Olympic committee and that body may award an athlete for their performance in a given sport. The amount varies from country to country, but the United States Olympic Committee awards athletes $25,000 for a gold medal, $15,000 for a silver medal, and $10,000 for a bronze medal. Some countries offer no cash prize, such as Great Britain, and many offer six figures, often for only gold medal wins.
The medals themselves have intrinsic value as well since they are made of gold, silver, and bronze. Though, the gold medal isn’t 100% gold. It’s mostly silver (494 grams) that’s been gilded with 6 grams of gold. While it’s likely worth far more to the athlete, the melt value is still several hundred dollars.
So how are the athletes taxed on their winnings?
Get every deduction you deserve. With TurboTax Deluxe, we'll search over 350 tax deductions and credits so you get your maximum refund, guaranteed. It’s free to start, and enjoy $10 off TurboTax Deluxe when you file.
Because the Olympics are in Rio de Janeiro, the prize money is considered income they’ve earned abroad, and is still subject to IRS taxation. The United States, unlike many other nations, has a worldwide taxation system, rather than a territorial taxation system, meaning that any income earned abroad is subject to both local and United States taxes. While many other countries exempt Olympic prize money as a special case, the United States does not.
Prize money from competition doesn’t mean the income is treated any differently. If you're Michael Phelps, who earns millions in endorsements that put him in the highest bracket of 39.6%, you’ll be on the hook for $9,900 for each gold medal, $5,940 for each silver medal, and $3,960 for each bronze medal. If, however, you’re in the lowest tax bracket of 10%, you’ll only owe $2,500, $1,500, and $1,000 for gold, silver, and bronze, respectively. As for the value of the medals, they are considered taxable as well since they are awarded based on the athlete’s performance.
In other sports that feature prize pools, such as golf, you can take deductions for expenses. With the Olympics, most athletes will have their travel and other expenses paid for by the committee as well. In that case, they wouldn’t have any offsetting expenses on the income.
Before you get too upset about athletes being taxed on their wins, remember that the athlete’s brand and marketing power skyrockets under the bright lights of the Olympic competition. While $25,000 is a fantastic sum for earning the gold, the number of endorsements and speaking engagements an athlete stands to secure upon returning home will make the tax bill seem irrelevant. USA! USA! USA!