OVERVIEW
This year’s Tokyo 2020 Summer Olympics may have just come to an end, but the Games’ financial fun is just beginning. Olympians who earned medals this year will bring home national glory and athletic prestige. In return, Uncle Sam will gift them with taxes.
The Olympic gold medals granted in Tokyo are estimated to value around $810—but that’s not what America’s top athletes are getting taxed on. Rather, Olympians are taxed on the prize money awarded to all medalists by the United States Olympic & Paralympic Committee. The prize amounts this year were: $37,500 for Gold, $22,000 for Silver, and $15,000 for Bronze.
The IRS treats these winnings as income, and as such, they get taxed as income. For top performers who receive hefty paychecks from endorsements, these prize amounts may fall liable to a “Victory Tax.” Swimming sensation Katie Ledecky‘s high net worth places her in the highest tax bracket; her 2 Gold and 2 Silver medals — totaling in $119,000 prize earnings — will be taxed at the top marginal tax rate of 37%.
Fortunately, there is hope for other top athletes who haven’t garnered such lucrative sponsorships. The United States Appreciation for Olympians and Paralympians Act of 2016 established a $1 million threshold for tax exemption for Olympic athletes. Olympians earning under $1 million after deductions do not have to pay tax on their earnings, and are thus exempt from the dreaded Victory Tax. Medal values – like this year’s $810 medal cost – are also non-taxable under this law.