Olympic Medalists and the Taxman. Make ’em Pay?
Oh, and about $10,000.
Yes, our Olympic heroes must pay income tax on both the value of the metal in the medal, and on the cash bonus that the Unites States Olympic Committee doles out for each medal won.
We’ve been rewarding our athletes with cash bonuses since the 2002 Winter Olympics. The current reward is $25,000 for Gold, $15,000 for Silver, and $10,000 for bronze. The value of the medal adds about another $600, $300, and $5 to taxable income, respectively.
A college student winning a Bronze medal, as University of Akron speedster Clayton Murphy did in the 800 meter run, may not owe much if anything on that $10,000 without other significant earned income.
On the other hand, Michael Phelps, winner of 5 Golds and 1 Silver medal in Rio 2016, will collect $140,000 in cash bonuses. His outside income, largely from endorsements, most certainly put him in the highest marginal tax bracket. Federal income tax on Phelps’ Olympic take will be right around $56,000. He may very well owe additional state income tax, depending on which state he calls home
“Federal income tax on Phelps’ Olympic take will be right around $56,000.”
Sure, Michael Phelps can afford it. He’s worth at least $50 million. So can members of the Men’s Basketball team, some of whom earn nearly $50 million a year. But many of our Olympians are struggling to make ends meet.
Olympic speedskater Emily Scott was featured in USA Today after she applied for food stamps in 2014. The exposure helped; her gofundme was overfunded.
Help May be on the Way.
The tax burden on our medal-winning athletes might just go away. A bipartisan bill sponsored by Sen. John Thune (R-S.D.) and cosponsored by Sen. Chuck Schumer (D-N.Y.) would make the bonuses awarded Olympians and Paralympians tax-free. The bill (S. 2650) has passed the Senate and is expected to be considered by the House this fall. President Obama expressed support for a similar bill brought forth by Senator Marco Rubio in 2012.
I have read estimates that roughly $5 million is expected to be paid to our Olympians in medal bonuses this summer. If you assume that most of our athletes have incomes that land them in the 15% and 25% tax brackets, the cost of this bill can be guesstimated to be in the neighborhood of one million dollars or less.
Is There a Better Way?
I’m not the first person to write about the plight of the amateur athletes, but I might be among the first to suggest that repealing the tax on them might not be the best way to reward our Olympic heroes.
What kind of flag-burning #Merica hating person would suggest such a thing? Surely, I am in favor of repealing this tax, yes?
Actually, no. To find out why and read my proposed solution, please continue this story at Physician’s Money Digest (LINKED HERE) and return to leave your comments. Thanks, friends!
Save, don’t spend. But if you must spend, get yourself a discount @ Amazon.