US Olympic champions have won hearts all over the world along with their gold medals. When they return home, they will not only be celebrated but will also be the recipients of considerable tax bills. The tax will encompass earnings based on not only the values of the medals, but also on the number and fees of the endorsement deals signed by the individual athlete. If the athlete is a prolific winner, and has taken home multiple gold medals, the effective tax rate will be a whopping 39.6 percent. This figure is calculated taken into account that the champions are placed in the highest tax bracket.
Taxes on winnings
Olympians in the US are subjected to what is known as “victory tax”. This tax is applied on both money received from Olympic committee when they win and also on value of that particular Olympic medal. The prize can be divided into two components: the medal itself and the cash bonus.
Gold medalists take home $25,000 and silver $15,000. Bronze winners pocket $10,000. These winnings are taxed by the US government as income. The IRS treats these winnings in the same way the service treats lottery winnings. Unlike the United States, majority of countries exempt athletes from such taxes. The medals are also valued and taxed. These values are dependent on the materials these medals are crafted from.
Tax and the athlete
In case of Olympic gold medals, which are primarily composed of silver with gold plating, are assessed to be of about $600 value as per present commodity prices. Silver medals are valued at almost $300 and bronze medals-made of copper- are regarded as of negligible monetary value, and cost about $4.
The amount of tax depends on the individual athlete. In most cases, the athlete is already a high earner and placed in the top bracket of the US tax system. If so, the tax rate will be 39.6 percent on total cash payout and medal value. According to an independent organization, a gold medalist will have to pay the IRS $9,000. Silver and bronze medalists will have to pay $5,940 and $3,960 respectively. These taxes are on only a single medal. For an athlete having multiple golds and silvers, the tax bill will be proportionately higher. To give an example, Michael Phelps, the champion swimmer-and worth about $55 million- could pay about $55,000 in taxes. It must be said that atheletes in lower tax brackets can pay less. The training cost can also be deducted from the tax bill.