Olympic medals: gold to the IRS too?
They’d be unwise to forget him altogether, however. As with so much in life, Olympic glory comes at a price, and by price, we mean tax.
It’s not the hardware itself that’s likely to trigger a tax bill (though it could). It’s the cash that goes along with it.
Athletes who make the podium can look forward to a check from the U.S. Olympic Organizing Committee: $25,000 for gold, $15,000 for silver and $10,000 for bronze. Like lottery winners and Jeopardy champions, those winnings are taxable.
Individual sports including cycling and swimming have started to offer bonuses to their winners too. Wrestlers have a shot at $250,000 per gold metal this year as well.
Even sponsors are paying up for the big win. Yahoo! Sports recently reported that swimming star Ryan Lochte is expected to earn six-figure bonuses from Gatorade, Speedo and other major sponsors. Rival Michael Phelp’s 2008 $1 million windfall from Speedo was given to charity.
It’s all taxable, explains Alex Knight, a tax partner at Atlanta’s Habif, Arogeti & Wynne: “It’s no different from winning Wheel of Fortune or the lottery.”
The fact that the Olympics are taking place in the U.K. means that any income earned in London could be taxed by the British government. As is customary with the games, British authorities have agreed to waive tax claims on the medal wins. Money a U.S. athlete might earn on the side while across the pond — say, by attending events with a key sponsor — would be taxable by the British, Knight says.
U.S. citizens would get a credit for any British taxes paid against their federal taxes, but with the UK’s highest marginal tax rate of 40 percent exceeding the U.S.’s 35 percent, top athletes could end up paying higher taxes than usual on those earnings.
Even the medals themselves could be seen as something of value, a gift of a commodity metal, and therefore taxable by the U.S. government, says Knight. He cites as precedent a 1969 tax case that required base-stealing baseball star Maury Wills to report as income the value of the Hickok Belt he received as 1962′s athlete of the year.
Still, Knight doesn’t expect to see the IRS chasing after athletes for a slice of their gold. “I have to imagine that would be a public relations nightmare,” says Knight.