American medal winners of 2016 Olympic Games being held in the Brazilian capital city of Rio de Janeiro must pay taxes to the US Government. The taxes must be paid on the prize money. Other than the cash component, they also must pay the due taxes to be levied on the actual value of the medals. According to Ahiza Garcia of CNN, the cash prizes given away by US Olympic Committee comes out to be $25,000, $15,000 and $10,000 for gold, silver and bronze medals respectively.
It is to be noted that while both the gold and the silver medals are made of silver, the bronze medals are made from copper. The medals in Rio can be counted as among the heaviest and the largest and they contain approximately 500 grams of copper or silver. In this manner, it is calculated that a gold medal carries a value of $564 and silver comes to $305. The value of bronze is negligible and it is thus not subjected to income tax. The total tax to be paid by the athletes is determined by federal and state tax rates.
To give an example, Michael Phelps, the winner of five gold medals along with one silver medal in this episode of the Olympics, must pay approximately $55,000 in taxes. All athletes are taxed as both the cash and medals acquired in the Olympics are regarded as income- similar to winning lotteries, the Nobel Prize, game shows or striking gold at the casino.
According to the group Americans for Tax Reform, the amounts mentioned above are the maximum amounts of money an athlete could possibly pay. The actual tax varies widely and depends on the tax circumstances of the individual and the available deductions. However, all American athletes must comply with the code as written down by the IRS, and calculate their taxes from the medal winnings likewise. It is however a headache they want to avoid.
Lawmakers are aware of this problem. Senator Marco Rubio of Florida in 2012, proposed a particular bill to exempt Olympians from paying such taxes. He said that athletes who win medals for the country must not be punished for their achievements. The bill, however, did not pass. Senators Chuck Schumer and John Thune proposed a similar bill in 2016. President Barack Obama also reputedly favored an exemption from taxes in such cases.