By: Carl Garner, CPA, Mauldin & Jenkins
Competing in the Olympics is taxing for sure, but is it taxable? After all, those gold, silver and
bronze medals represent a lot of hard work. But, they are also, well, gold, silver and bronze,
right? That’s got to be worth money. Come to think of it, do the athletes earn money for
participating – whether or not they win? And, if so, can they deduct the cost of sports equipment
and other participation expenses?
For Olympic athletes, from skiers to swimmers, being part of the Games brings a host of
financial consequences that can include tax issues. The medals themselves, however, aren’t
always the hefty chunks of precious metal they appear to be.
The Internal Olympic Committee (IOC) awards medals to the top competitors in each event, and
IOC rules mandate that gold and silver medals contain a minimum of 92.5% silver. Gold medals
are plated with at least 6 grams of gold – and it has to be pure. Silver medals are typically pure
silver, although they aren’t required to be, and bronze medals are a mixture of copper (95%)
and zinc (5%).
The end of the victory tax (mostly)
The tax question is a bit more complicated. Most U.S. athletes who take part in the Olympic
Games don’t pay income tax on their medals, though American medalists do get paid for their
outstanding performance. The United States Olympic & Paralympic Committee (USOPC)
rewards competitors with $15,000 (bronze), $22,500 (silver) or $37,500 for each medal they
bring home.
Until 2016, that money was considered taxable income, but D.C. leaders thought such a ‘victory
tax’ was unseemly and not the best way to encourage American athletes. Just a few months
after the closing ceremony of the 2016 Olympic Games in Rio de Janeiro, President Obama
signed into law the United States Appreciation for Olympians and Paralympians Act. This law
declared prize money from the USOPC as well as the value of an Olympic medal untaxable.
There’s an exception to that rule, however. Athletes with an adjusted gross income of $1 million
or more are required to report and pay taxes on their USOPC winnings. That’s to ensure
professional athletes who make big bucks with contracts and endorsements don’t get a tax-free
windfall through their participation in the Games.
Other tax concerns
The tax break on Olympic prize money is only a federal freebie; athletes may face state tax
liability stemming from their winnings. And, the money successful Olympic athletes warm from
endorsing products, services and brands is fully taxable as ordinary income at the federal level.
Some of the expenses incurred in training for, traveling to and participating in athletic
competitions may be allowed as deductions from gross income, but that’s not an automatic perk
of playing the game.
To be deductible, the expenses must be paid by the individual taxpayer (not a sponsoring
organization or academic institution, for example). The athlete must also be able to prove the
sport in question is a trade or business rather than a recreational activity, albeit one that they’re
exceptionally good at performing.
It’s not about the money
In the end, competing in the Olympics usually ends up costing the participants thousands of
dollars as well as years of grueling physical effort. The financial rewards, if any, only partially
offset the expenses of participation for all but a few. The small handful of victors that emerge
with enough name recognition to drive endorsements and paid appearances are the exception.
Then again, every Olympic athlete is very much the exception in terms of talent and
commitment to their respective sport(s). They are the best in the world. And that, truly, is the
magic and the reward of taking part in the quadrennial Olympic games.
