Tax on U.S. Olympic medals makes IRS biggest winner

Who gets a piece of every American medal? The IRS of course, since the US tax system taxes even Olympic prizes and awards if the recipient earns $ 1 million per year or more. Most awards do not have this threshold, so in that sense, Olympians benefit from better taxation. After the Tokyo 2021 Games, the United States collected a total of 2,941 medals in the winter and summer games, including 1,166 gold medals. Winning isn’t about the money, but each medal comes with a cash allowance of $ 37,500 for gold, $ 22,500 for silver and $ 15,000 for bronze. The exemption of less than $ 1 million occurred in 2016, HR 5946, United States Appreciation for Olympians. If you’re on the verge of garnering millions of product referrals, you might not be too bothered to learn that the $ 37,500 cash prize that comes with a gold medal will also be taxed at 37%. No one likes their money being cut by taxes, of course, but the cash element of medals is low. The real payday is product endorsements, which can run into the millions according to a report in the Washington post. Tax rates could increase under the Biden administration’s proposals, but for now, prize money is subject to a 37% marginal tax rate.

In the past, tax bills have been introduced in Congress to exempt Olympic gains from the grip of the IRS. And in 2016, in HR 5946, Congress said Olympians earning less than $ 1 million should not have their medals taxed. After all, the IRS’s ability to tax just about anything is pretty much entrenched in law. These medals come with cash prizes, and because the money is in cash, they can trigger federal income taxes for income above the threshold. Allocations come from the US Olympic Committee, not the US government. Of course, they are small compared to what the medals bring in endorsements and other income. Since 1986, most prizes and awards have been fully taxable. the IRS website warns that cash prizes and rewards are taxed whether you win a drawing, quiz, or beauty pageant. It’s the same rule for any cash prize, be it the lottery, a Nobel Prize and Olympic medals too.

In addition, you must declare the fair market value of the goods or products. That’s all other income to Form 1040. Most people only pay tax, but you may be able to avoid taxes by denying a reward. A famous example was George C. Scott, who turned down an Oscar for Best Actor for Patton. You can even refuse a Nobel Prize, and six Nobel Prize winners did. Nobel laureates receive a diploma, a gold medal and money in Swedish crowns. The amount reached $ 1.5 million, but it is now considerably lower. President Obama skilfully managed to accept his Nobel Peace Prize, but donate the accompanying money to charity. And because he had arranged it in advance, a sort of re-donation of the $ 1.4 million cash reward, it was tax-efficient. If he had just won the Nobel Prize and taken $ 1.4 million, he could have turned around and donated it to charity.

Unfortunately, however, the tax consequences of a new donation can be problematic. That is, he could not have written off the entire $ 1.4 million. Why? Because you cannot deduct charitable contributions exceeding 50% of your contribution base ”- usually your adjusted gross income. This is why his advance arrangement for the money bypassed his income entirely. It was good tax planning. Of course, gaining its own benefits, financial and otherwise. Olympic medalists will win big afterwards, and this is also true for Nobel Prizes. Some estimate that a Nobel Prize injects $ 24 million into the coffers of an institution and even adds two years to a laureate’s life. Research Policy study suggests that a Nobel Laureate is perfect for an IPO.