They may bring honor and prestige to the US, but it doesn’t mean that the IRS will not collect taxes from their winnings at the Rio Olympics.
Until otherwise amended, the taxman continues to collect levies on winnings like lottery, bonuses, game show or casino earnings, which it considers a victory tax. Unfortunately, the law includes Olympic medals.
In the case of Michael Phelps, perhaps the greatest Olympian that the US ever produced, he’s due to pay about $55,000 Rio Olympics taxes from the gold medals and lone silver that he won. Most of these are cut from Uncle Sam’s own bonuses to its athletes—that’s $25,000 for gold, $15,000 for silver and $10,000 for bronze.
— People Magazine (@people) August 16, 2016
According to WSJ, Phelps won five golds and one silver. That means his taxable income is about $140,000. Gymnast Simone Biles’ taxable income reaches $110,000.
As of the report, the US delegates to the Rio Olympics already won 80 medals, and their cumulative Rio Olympics taxes already amounted to about $700,000.
The athletes are also obligated to pay Rio Olympics taxes for the value of the medals that they won. In this event, for example, the gold is worth about $600, the silver is worth half of that, while the bronze is almost worthless.
However, Holthouse Carlin & Van Trigt resident tax expert Blake Christian told USA Today that the medals would end up worth much more if the winning athlete sells it in the market. For example, a gold medal can easily fetch $10,000 or more. Of course, they pay bigger taxes out of their earnings, as well.
The American Tax Reform does levy Olympians, just like it does Nobel Prize winners, but the taxes are divided into brackets, depending on the earnings of the athletes. The range for the Rio Olympics taxes could be from 39.6 percent to just 10 percent.
For those belonging to the top tax bracket, like Michael Phelps, almost a third of the bonus they get from the United States Olympic Committee will go to taxes. The silver will be levied $5,940 while a bronze medal will cost $3,960 in taxes.
Medalists from the Rio Olympics will need to consult their tax adviser after the competition ends. https://t.co/Y4eA8C4WS3
— KC Business Journal (@KCBizJournal) August 16, 2016
Time said that most of US Olympians don’t pay that much in taxes unless they also have very lucrative endorsements. Then they can also write off some of their obligations to the government if they spent their money for training and the trip to the Rio Olympics.
But US lawmakers are aiming to change all that.
Last month, South Dakota Senator John Thune introduced the Appreciation for Olympians and Paralympians Act to the Senate. However, that wasn’t the first time that lawmakers tried to give Olympians their due by exempting their winnings from taxes, either.
Back in 2012, Senator and former presidential candidate Marco Rubio also introduced a similar bill. On Capitol Hill, Texas Republican Rep. Blake Farenthold also pushed his own version of a bill to exempt US Olympic medal winners.
Elizabeth Peace, the candidate’s spokesperson, told Fortune, “We’re hoping to make a push for this when we come back to session, but there’s no floor schedule yet.”
Also, Senator Chuck Schumer of New York called on his colleagues to fast-track the proposal to exempt Olympians from paying Rio Olympics taxes.
“Our Olympian and Paralympic athletes should be worried about breaking world records, not breaking the bank, when they earn a medal,” he said. “Most countries subsidize their athletes. The very least we can do is make sure our athletes don’t get hit with a tax bill for winning.”
Meanwhile, People said that athletes with lucrative endorsements like Michael Phelps wouldn’t lose sleep over the Rio Olympics taxes. However, it said that they are the exemptions to the rule since average US Olympians “rely on stipends” from the US Olympic committee as well as “income from a day job” to pursue their athletic endeavors.
[Photo by Dean Mouhtaropoulos/Getty Images]