By Andrew Lampropoulos, Associate
Every two years, the world gets Olympic fever. Over 15 days of competition, NBC’s 2016 Olympics coverage averaged 27.5 million viewers across their platforms, including digital streaming. Millions of viewers around the world watched as athletes told their stories and celebrated their successes. During the 2016 Rio Olympics, Team USA’s athletes won 46 gold medals, 37 silver medals, and 38 bronze medals, for a grand total of 121 Olympic medals. Each of these medals came with a cash prize, valued at $25,000 for a gold medal, $15,000 for a silver medal and $10,000 for a bronze medal. But until recently, victory came with a catch for some athletes – a tax on winnings referred to as the “victory tax.”
The “victory tax” required all Olympians to report their winnings as “other income” on their tax returns. Winning a gold medal resulted in a $8,986 tax per medal, winning a silver resulted in a $5,385 tax per medal, and winning a bronze medal resulted in a $3,502 tax per medal. This tax might not have such a dramatic effect on sponsored athletes who sign endorsement deals worth millions of dollars, but for the athletes who haven’t yet secured any sponsorship deals, the tax burden can sting. With 121 combined medals, Team USA will pay a combined $745,677 in federal taxes.
In 2012, members of Congress tried to get rid of the “victory tax;” however, the bill failed. But in October 2016, a new bill to block the “victory tax” passed the senate unanimously and passed the house, 415-1. It was signed into law by President Obama on October 7th, 2016. The new law eliminates federal taxes on Olympic medals and cash prizes for athletes that make less than $1 million per year. This means that athletes like Michael Phelps who made $12 million in 2016, will still have to pay taxes on their medals and prizes, but the athletes that make less than $1 million a year are exempt from the “victory tax.”
While the “victory tax” may no longer be a factor for most Olympians, all Americans are required to pay taxes in some capacity. To get advice on what you need to do to prepare your taxes, please consult your tax professional.
---
The information contained in the Knowledge Center is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. In no event will CST or its partners, employees or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this Knowledge Center or for any consequential, special or similar damages, even if advised of the possibility of such damages.