Fresno, CA — The athletes from the United States who are participating at the 2012 London Olympic games are doing a hell of a good job winning the gold at various events. Most of these athletes are instant hometown heroes and people are excited to see them back on American soil and so does the IRS.
It is not common knowledge that athletes who perform at the Olympics and win medals receive an honorarium from the Olympic committees of their home countries. According to Forbes, European countries are pay huge bucks for people who bring home the gold. Italy provides the biggest medal bonus at more than $182,000. This is followed by Russia who is willing to give $135,000 to whomever brings home that golden bacon and even bronze winners get to take home $54,400. Ukraine also shells out the big money for gold medalists at $100,000, $75k for silver, and $50,000 for bronze. But unlike these nations that are generous in the pocket and are willing to shell out sums of money for the big winners, the United Kingdom can be considered quite the opposite. The host nation can be considered the worst when it comes to bonuses for its athletes because they do not pay any incentives.
Meanwhile, the United States has a more modest compensation for its top performers: $25k for gold, $15k for silver and $10k for bronze. But in America, honorariums are considered taxable income. These athletes will come back home, wave to the cheering crowd and a few lucky ones might even meet the president or be offered those deal of a lifetime endorsements but after the hoopla has died down, the IRS will come knocking at their door and hit them with more or less $9,000 worth of taxes.
For gold medal winners, Uncle Sam would probably charge $8,986 in taxes. These taxes will cover the value of the medal which roughly costs $620.80 (the medal is gilded with plated gold, minimum of 6 grams) and the $25,000 honorarium. But this tax liability figure is based on the notion that the taxpayer is paying a 35% tax rate which is applicable to people who are earning within the area of $388,350 per year. You may have won the gold medal but if you are not in the league of a Michael Phelps or Ryan Lochte who both have lucrative endorsement contracts and compete at big money-making events, you will not be hit with that much tax.
Since it is election year, politicians have blown it out of proportion and has made it into issue for debate. But some of them do have a point, the issue of the honorariums and gold medals being taxable income is quite complicated and is still a gray area when it comes to the tax code.
Sen. Marco Rubino (R-Fla.) is proposing a bill that will abolish the federal government’s imposed tax on honorariums and gold medals earned by athletes at the Olympics. According to the senator, such taxes punish those who strive to succeed. But in order to do this a loophole has to be discovered or created in the tax code that will justify why honorariums are a unique or special form of income and should not be considered as regular income in order for it to be exempted.
But everyone is jumping in on the issue right now and giving their two-cents on the issue. It is no longer simple to just bring home the bacon because Uncle Sam also wants to stick a fork on the athletes to make sure they’re done.