Here's why American gold medalists could take home an extra $14,000 from the Olympics this year
American Olympic athletes who take home medals from the PyeongChang Olympics will also get thousands in prize money from the U.S. Olympic Committee.
Thanks to a new law passed after the 2016 games in Rio, the medalists no longer have to hand over a big chunk of that cash to Uncle Sam.
In addition to the Olympics medals themselves, U.S. athletes who mount the podium in South Korea will get $37,500 for a gold medal, $22,500 for a silver medal and $15,000 for bronze. That money, paid by the U.S. Olympic Committee, is meant to reward them for the years of hard work and the fortunes many have already spent pursuing a dream.
Those bonuses are nothing new, although the amount has increased in recent years. But they used to come with a big catch: As far as the federal government was concerned, those prizes were income, so past winners were expected to fork over a share to the IRS.
Based on 2018 rates, that could have meant a bill of nearly $13,900 per gold medal for a high-earner athlete in the top 37% tax bracket.
From the perspective of tax law, all this makes perfect sense. Lottery and gambling winnings are also taxed as income, as are the bonuses that regular workers earn at their desk jobs.
But during the 2016 summer games, the spectacle of striving Olympians — precious few of whom actually do make enough enough to get anywhere near the top tax bracket (which kicks in a $500,000 for singles this year) — there was a public outcry over what was dubbed a “victory tax.”
The upshot was that Congress passed, and President Obama signed, a law carving out a special exception for Olympic prize money. The law was signed in October 2016, but it was made retroactive to Dec. 31 2015 — so winners from the Rio summer Olympics were ultimately able to claim the tax break.
There is a catch: Athletes who earn more than $1 million a year — essentially stars like snowboarder Shaun White, with hefty endorsement deals — won’t qualify.
But those top earners will likely still get plenty of perks from the tax cut President Trump signed into law in December, including a drop in the top rate to 37% from 39.6%.
Nonetheless, an unmarried Olympic gold medalist with income of $500,000 to $999,999 would save the maximum possible — about $13,900 — on their tax bill. A silver medalist with income of $50,000 would still save about $5,000.