Will U.S. Olympic Athletes Get Hit with a Tax Bill if They Win in Tokyo?
Thanks to a law passed in 2016, our medal-winning athletes will have little to worry about from the IRS.
Imagine spending years training to be the best at a sport. You sacrifice time with family and friends to be the greatest in the world. Then the Olympics come around and you win a gold medal. Finally, after devoting years of time and effort to be the best, you have a medal that represents all your hard work. That medal is likely invaluable to you. But what about the IRS? Are they going to force you to pay tax on the medal?
The answer used to be "yes." Before 2016, the IRS had no problem slapping a value on Olympic medals for tax purposes. Athletes who won medals then had to pay tax on the value as well as on any money given to them by the U.S. Olympic Committee (USOC). For instance, if the IRS valued a gold medal and related prize money at $50,000, they expected U.S. gold medal winners to add $50,000 to their gross income at the end of the year.
But things are different now. Most Olympians don't have to pay tax on their medals or prize money anymore thanks to a law passed in 2016. The law doesn't help every athlete, and the rules are still a bit fuzzy when it comes to certain funds received for training expenses, but your average Olympic medalist is in a much better tax position now than they were years ago.
2016 Changes to Olympic Athletes' Income
In 2016, the United States Appreciation for Olympians and Paralympians Act was passed. It allows athletes (including Paralympic athletes) to exclude the value of Olympic medals and any prize money given to them by the USOC from gross income for tax purposes. Currently, the USOC awards gold medal winners $37,500, silver medal winners $22,500, and bronze medal winners $15,000.
Does this mean that Olympic athletes will never be taxed on medals or prizes won at the Olympics? No. The exclusion doesn't apply to athletes with an adjusted gross income over $1 million. The IRS is therefore allowed to continue taxing many of the most famous superstars at the Olympics. It's also important to note that the Appreciation for Olympians and Paralympians Act is the only piece of legislation dealing with athletic achievements and the exclusion of income. So, medals and prize money won at other competitions are still taxable.
The Value of Olympic Medals
You may be wondering just how much a gold medal from the Olympics is worth these days. If you were to melt down a medal won at a recent Olympics, a gold medal would be worth around $800, a silver would be worth about $450, and a bronze would be worth around $5. But older medals, especially those with historical significance, could sell for a much larger amount of money. For example:
- Jesse Owens' 1936 Summer Olympics gold medal sold for $1.47 million in 2013;
- A 1980 "Miracle on Ice" Winter Olympics ice hockey team gold medal sold for $262,900 in 2014; and
- A 1984 U.S. Olympic men's basketball team gold medal sold for $83,188 earlier this year.
Additional Income for Olympic Athletes
As a result of the 2016 law, the rules are clear that an Olympic athlete won't be taxed on the value of an Olympic medal or any prize money given to them by the USOC. However, the rules are not so clear when it comes to the taxation of money given to Olympic athletes to cover expenses.
For instance, are gifts given to an athlete by friends or family taxable? Over the years, we have seen many Olympic athletes relying on family and friends to help pay for basic needs while training and competing in the Olympic events. For example, the mother of a two-time gold medal-winning U.S. gymnast went bankrupt in part due to the costs of her daughter's training. However, as long as the money is given to the athlete voluntarily and without any strings attached, they can claim the funds as a gift. This means the athlete can exclude the money from gross income.
What if an athlete needs money and uses crowdfunding for help with his or her Olympic pursuit (such as needing money for equipment or training)? Crowdfunding allows strangers to give money to athletes who are asking for the funds directly. In 2016, over $400,000 was raised on GoFundMe.com for athletes heading to the Olympics. This year, several athletes asked for crowdfunding help to get to the 2020 Tokyo games.
The IRS has yet to clearly answer the question of whether Olympic athletes can be taxed on money given to them through crowdfunding sources like GoFundMe. The small amount of information that we do have from the IRS comes from a ruling issued in 2016. Put bluntly, the IRS states in the ruling that the tax treatment of crowdfunding income can only be decided by the specific facts and circumstances of the case, and that money from crowdfunding is generally included in taxable income unless it's a loan that must be repaid, capital contributed to an entity in exchange for an equity interest in the entity, or a gift made out of detached generosity and without any "quid pro quo."
The ruling doesn't directly say that Olympic athletes can exclude crowdfunded money from their gross income. It does, however, lay down a path for athletes to use when fighting the IRS on this question.