As the United States Olympic team heads back from a very successful showing in the 2012 London Olympics the IRS is eagerly awaiting their return. U.S athletes are responsible for paying income tax on any winnings that they had overseas and some tax law precedence also says that they must pay taxes on the actual value of the medals they received.
For the 2012 London Olympics, the U.S. Olympic Committee pays any U.S. athlete that wins a medal a monetary prize in addition to the medal they received. The Olympic Committee paid each gold medalist $25,000, silver medalists $15,000 and bronze medalists $10,000. With a total of 256 medals given to U.S. athletes, their total take-home taxable income from the monetary value of the medals and income received from the Olympic Committee is $5,196,885. This amount could result in IRS taxes of $1,455,128 to be paid to the IRS (assuming an average tax rate of 28%). continued below image
With elections on the horizon, President Barack Obama supported a bill that was proposed by Republican Senator Marco Rubio to make the winnings of Olympic athletes tax-free. U.S. Representatives Mary Bono Mack, G.K. Butterfield, and Aaron Schock also introduced or supported similar bills. There have also been several lawmakers in several states (e.g. New Jersey, California, Georgia) that are willing to forgive any state taxes that the athletes would have to pay.
Many Olympic winners will pay less in taxes then many would otherwise think. This is due to the fact that many athletes will be able to deduct the cost of equipment, travel, training, and any other expenses they had to pay. The real issue at heart is why the United States assesses taxes on foreign income when 99% or more of other countries in the world do not.