There’s gold in them thar medals – for the tax man

August 18, 2016 by Steve Banner
Man in swimming pool holding up trophy and Gold Medal

That’s what the IRS may think, but it may all be about to change for the U.S. athletes competing at the Rio Olympics. Unlike most of us, the IRS is well aware that the U.S. Olympic Committee pays medalists a cash bonus of $25,000 for winning gold, $15,000 for silver, and $10,000 for bronze. Even if we armchair amateur athletes had known that the medal winners would receive a cash payout to reward their world-leading exploits in their respective fields, there is no way we would ever suspect that such prizes would be taxable for the competitors who had devoted years of their lives to their pursuit of a medal of any color.
 

Well, we would be wrong to think that way because under Internal Revenue Code (IRC) Section 74 the value of the medals and any associated cash payments are indeed taxable to their unsuspecting recipients. That’s enough to tarnish the gleam of a new medal and wipe the smile off the face of anyone who has put years of hard work into earning their way on to the hallowed presentation podium. Come to think of it, maybe that’s why so many athletes have tears in their eyes as they watch Old Glory being raised while the gold medal winner’s national anthem is played. Although we’ve often heard medal winners say afterwards “I’m proud to represent my country,” we have yet to hear any of them add “and I’m so happy to be able to give a share of my winnings back to Uncle Sam.” Not yet, anyway. And we never will, if a new bill that will come before the lower house of Congress after the summer recess gets passed as expected.
 

Known as the TEAM Act (Tax Exemptions for American Medalists Act of 2015), the bill will amend IRC Section 74 to allow athletes to exclude from their gross income “the value of any medal awarded in, or any prize money received from the United States Olympic Committee (USOC) on account of, competition in the Olympic Games.” The provisions of the bill would apply to both the Olympics and Paralympics, retroactive to the beginning of 2016. The bill has already passed the Senate, and its safe passage through the House would give a taxpayer like swimmer Michael Phelps some 57,000 reasons to widen his well-earned triumphant grin even further.
 

Thanks to his outstanding efforts that won him five gold and one silver medal at the Rio Olympic Games, Phelps is due for a USOC bonus in the region of around $144,000, which includes the value of the metal from which the medals are made. Thanks also to the substantial income he earns each year from sponsorships, endorsements and other sources, Phelps stands to be taxed on his windfall at the top rate of 39.6% or $57,024 under the current law.
 

After September that could all change. And that’s enough to put the shine back on everyone’s medals.


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Steve Banner, EA, MBA
Tax Content Developer

 

Steve Banner began his career in the field of income tax in 1977 and has since gathered business experience in a variety of countries and cultures. In addition to the United States, he has lived and worked for extended periods in Australia, Saudi Arabia, Canada, and Sweden. Along the way he studied Adult Education and earned a Bachelor of Education, Master of Educational Administration, and MBA. He joined TaxAudit in 2016, where he is a Tax Content Developer.


 

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