If you’re anything like me, when you’re up late watching archery for the third straight night, all you can think about is how much money are these people making? Is this a viable career? And most importantly, how are Olympic athletes taxed on their medals and winnings? After all, they haven’t been training for five years, and they wouldn’t be sleeping on cardboard in Japan for nothing, right?
And while I don’t have the answer to how much they’re making or whether or not it’s a viable career, I can tell you about the tax rules related to what was deemed the Victory Tax and how it all changed in 2016.
The International Olympic Committee is the organization that awards athletes the gold, silver, and bronze medals, but it doesn’t pay out cash prizes to the winners. Each country has its own Olympic Committee that pays out money to the winners from their country. And it’s up to each country to decide if and how they’re going to assess tax on those winnings. After all, it is earned income.
So how much does the U.S. pay for an Olympic gold medal? U.S. Olympic athletes receive $37,500 for each gold medal they win. $22,500 for silver and $15,000 for bronze medals. Some athletes who are dominant in their sport can earn hundreds of thousands of dollars during the Olympics.
Before 2016, these amounts were subject to income tax, like lottery winnings and any other earnings. But right after the Rio Olympic games, some Senators had weird feelings about taxing athletes that were about to represent our country, so they changed the tax law a bit. President Obama signed the United States Appreciation for Olympians and Paralympians Act into law in October 2016, stating that a person’s taxable income would not include any prize money for participating in Olympic or Paralympic games. And that taxable income also cannot include the value of any medal won.
As is a common theme with taxes, there is a catch. Notice how the title of the article ends with “for most.” This law only applies to anyone making under $1 million in a tax year. If you’re a superstar athlete with endorsement deals and income well over $1 million in 2021, then you will have to pay tax on your winnings. But for many of the Olympic athletes, the medal they won in Tokyo, and the prize money that it came with are tax-free. I guarantee that gold tastes a little sweeter, knowing Uncle Sam doesn’t even want a cut.
Fun Facts about the Olympics
- The purpose of the ancient Olympic Games was to promote peace amongst the warring city-states of Greece
- The Olympics have been held every four years since 1896.
- In the 1920s, medals became gold, silver and bronze instead of just being made out of copper or other metals.
- Today’s Olympic Gold Medal is made almost entirely from silver with approximately six grams of gold. The medals for this year’s edition were made from 80,000 tons of recycled electronics. The last time they were made entirely of gold was in the 1904 Olympic Games.
- From 1912-1948, artists participated in the Olympics: Painters, sculptors, architects, writers, and musicians competed for medals in their respective fields.
- The official languages of the games are English and French, complemented by the official language of the host country.