This past Thursday, the Senate approved a bill that will put an end to the so-called Olympic “victory tax”.
American Olympic Medalists are awarded cash prizes from the United States Olympic Committee (USOC) – $25,000 for Gold, $15,000 for Silver, and $10,000 for Bronze. Previously, the IRS has considered this prize money to be a taxable income, requiring these athletes to pay a significant income tax (up to a maximum of 39.6%) on their medals. This maximum tax equated to approximately $9,900 for a Gold medal, $5,940 for Silver, and $3,960 for Bronze.
Just before the beginning of the 2016 Summer Olympics, the Senate passed legislation to make any winnings tax free. The House then approved a similar bill, proposing elimination of the “victory tax”, currently imposed on both Olympic and Paralympic athletes. This past Thursday, the Senate approved this bill, thus eliminating the Olympic “victory tax” in most cases.
The bill will make any winnings tax free, however it is important to note that the tax will still apply to athletes who earn more the $1 million pear year, including Michael Phelps. The vote to eliminate this tax occurred on the same day President Obama recognized the entire Olympic and Paralympic teams’ accomplishments in Rio at the White House. President Obama is expected to sign off on the bill in the near future, and it will be in effect later this year.