I would like to start by saying how proud I am of all of the athletes who competed in the 2016 games, and especially grateful for the US Olympians, who represented and brought honor to the best country in the world. Thank you!
The 2016 Summer Olympics have now concluded, and the United States has taken home the most medals, with a total of 121 (46 gold, 37 silver, and 38 bronze). That’s 121 trophies, 121 badges of honor, 121 reminders that hard work pays off, and 121 taxable items of income.
Let’s take a deeper look at this “victory tax” and dive (pun intended) into the tax implications of bringing home an Olympic medal.
The gold medal, as most would suspect, carries the highest tax burden. US Olympians who win gold receive, in addition to the medal, a $25,000 cash prize paid by the United States Olympic Committee. This is taxed as ordinary income and could cost an Olympian up to $9,900 (using the top federal tax rate of 39.6%), depending on his or her tax bracket.
While much smaller than the cash prize, the value of the medal itself is also considered taxable income. Contrary to popular belief, Olympic gold medals are not solid gold; they are mostly silver and only about 1.2% gold. They are valued between $550-650.
The cash prize awarded for winning a silver medal is $15,000, generating an income tax of up to $5,940, depending on the taxpayer’s bracket. Silver medals are actually 100% silver, and worth in the neighborhood of $300-350.
Last, but certainly not least: the bronze medal. The cash prize for third place is $10,000, which translates into a tax of up to $3,960.
The medal itself is about 95% copper and 5% zinc and is valued at a whopping $2-3. Given the negligibility, the value of bronze medal is not taxed.
Example: Michael Phelps
Using Michael Phelps’s performance in the 2016 Rio Olympics as an example, let’s check out the table below:
|Number of Medals Won||Total Cash Prize||Total Value of Medal(s)*||
Total Federal Tax Burden**
*Average value used
**Assuming Michael Phelps is in the highest tax bracket (you know, given his $55 million net worth)
Keep in mind, this is Phelps’s federal tax burden – that number will increase by the amount of state taxes owed. Come April, Phelps et al. will be swimming (excuse the second pun) in taxes thanks to the “victory tax”.
Nick Aiola is a CPA located in New York, NY. Nick provides tax and accounting services to a wide range of clients, including individuals, businesses, and fiduciary entities.