us olympic gold medal and taxesThe United States has been doing pretty well in the 2016 Summer Olympics, held this year in Brazil. As usual, the United States leads the medal count, including for gold, helped along by great performances by the United States swim and women’s gymnastics teams.

But what happens after the Games end and the athletes go home with their medals? The reality of the situation is that they will likely owe taxes on their medals and their prize money.

U.S. Citizens are Taxed on Foreign Earnings

One of the first things to understand is that the United States imposes a tax on all the earnings of its citizens, no matter where in the world it was earned, according to an article by Kelly Phillips Erb on Forbes. This means that when an Olympic athlete receives a medal, prize money, and endorsements, all of that income is supposed to be reported to the IRS, and applicable taxes should be paid.

This applies to other income as well. If you live in a foreign country and make money, you are still expected to report that income to the IRS. While there is an exemption amount that applies to some of your income, the reality is that you still need to report to the IRS.

How Olympians are Taxed

Olympic athletes are taxed based on the value of their medals, according to the Forbes article, as well as on what they receive in prize money and endorsements.

First of all, the value of the medal is determined by the metal involved. With gold sitting at more than $1,300 an ounce, that has an impact. But wait: a gold medal isn’t entirely made of gold. According to NBC, the gold medals minted by Brazil for the 2016 Summer Olympics are made mostly of silver. There are 494 grams of silver and six grams of gold in a gold medal. As a result, the melted down cost is approximately $587.

So, while it might seem like someone like Michael Phelps is making a huge haul in gold this year, the reality is that his medals might not be worth as much as you think.

Olympians are taxed on the value of the medals, but that’s not where the real money is. Indeed, most of an Olympian’s earnings come from endorsements and prize money. Some countries offer prize money based on the medal earned, and the sport. That income is worth far more than the medal (at least in monetary terms), and it is going to be taxed. Depending on how much money someone earns from endorsements, bonuses, and prizes, the tax bill could run into the tens of thousands of dollars.

The good news, though, is that like all other business income, this can be offset. The Forbes article points out that athletes might be able to deduct the cost of training, travel, and equipment purchases from their Olympic earnings. This can substantially reduce the tax bill since many world-class athletes have plenty of expenses to go with their earnings.