With the medal count for the United States at a jaw dropping 81 as I write this article, the biggest winner at the Rio Olympic Games, Uncle Sam, won’t be making an appearance on the podium. Unofficially known as the “victory tax,” medals and cash bonuses (the U.S. Olympic Committee awards $25,000 for gold medals, $15,000 for silver and $10,000 for bronze) awarded to U.S. athletes at the Olympics count as taxable income.
The applicable tax varies depending on an athlete’s tax bracket and available deductions (athletes are allowed to deduct training and other expenses), with an athlete in the top 39.6 percent bracket potentially looking at a tax bill of $9,900 for a gold medal bonus, $5,940 for a silver medal bonus and $3,960 for a bronze medal bonus. Although the actual medals are subject to tax as well, the commodity prices for the metals they comprise of are relatively low so athletes have little to worry about, especially because the Olympic gold medal isn’t actually entirely made of gold (that practice was discontinued after the Stockholm Games in 1912; the current gold medal consists of silver and copper, gold-plated with about 1 percent gold). It’s a different story if an athlete were to consider selling his medal, with a recent estimate that Michael Phelps’ medals are worth at least $100,000 apiece.
Athletes like Phelps, who’s reportedly worth between $50 to $55 million, will have no problem shouldering the tax bill, but according to Sen. Chuck Schumer (D-N.Y.), U.S. Olympic athletes “should be worried about breaking world records, not breaking the bank, when they earn a medal." In an effort to eliminate taxes on the athletes, Schumer and Sen. John Thune (R-S.D.) introduced a bill earlier this year, which passed the Senate by unanimous consent on July 12. According to the Washington Post, a tax committee in the House of Representatives is expected to make the bill a top priority when they return in September.
Olympic medalists shouldn’t jump for excitement just yet, as Sen. Marc Rubio (R-Fla.) introduced a similar bill back in 2012, which was short-lived even with the support of President Obama.
Courtesy of Anna Sulkin, WealthManagement.com
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