Until recently, Olympic medals were taxable for all U.S. athletes, as were the cash prizes attached to coming in first, second, and third place. But a bill signed by Barack Obama in 2016 ended the Internal Revenue Service’s so-called “victory tax.”
“Medals are prizes, and all prizes are generally taxable,” Gil Charney, director of tax law and policy analysis at The Tax Institute at H&R Block, explained in a 2018 H&R Block article. “However, a new law passed after the summer games of 2016 in Rio de Janeiro exempts Olympic winners from taxes on the value of their medals or their cash prizes if their adjusted gross income is $1 million or less.”
That said, the tax preparation company pointed out that athletes might still be taxed on their winnings at the state and local level.
Athletes used to be taxed on both medals and cash prizes—which were far more valuable
Though athletes once had to pay taxes on both medals and cash prizes, the medals themselves didn’t increase their tax burden much. According to H&R Block, gold medals are worth $550 to $600, and silver medals are worth $300 to $350, and bronze medals are worth a paltry $4 to 5.
On the other hand, the cash prizes are much bigger paydays for American athletes. The United States Olympic Committee upped those prizes in 2016, announcing that Olympic athletes would get $37,500 for each gold medal, $22,500 for silver, and $15,000 for bronze, while Paralympic athletes would get $7,500 for gold, $5,250 for silver, and $3,750 for bronze medals.
As the Associated Press reported in 2016, swimmer Michael Phelps could have been on the hook for a $55,000 tax bill after winning five golds and one silver in Rio, and gymnast Simone Biles might have faced a $43,000 for landing four golds and one bronze.
Senator Chuck Schumer rallied against what he called the “victory tax”
Before that change became law, Senator Chuck Schumer pushed for the House to make Olympic winners exempt from the “victory tax,” or income taxes on their winnings.
“Our Olympian and Paralympic athletes should be worried about breaking world records, not breaking the bank, when they earn a medal,” Schumer said, reports The Washington Post. “Most countries subsidize their athletes; the very least we can do is make sure our athletes don’t get hit with a tax bill for winning. After a successful and hard fought victory, it’s just not right for the U.S. to welcome these athletes home with a tax on that victory.”
His wish was fulfilled when H.R. 5946—dubbed the United States Appreciation for Olympians and Paralympians Act of 2016—was passed by the U.S. House of Representatives in Sep. 2016 and the Senate a week later, and got Obama’s signature a week after that.
Even with the tax break, U.S. Olympians aren’t earning what athletes from other countries are
Some people think the tax break isn’t enough, especially since the United States is a rare country that doesn’t provide government funding to Olympians, according to CNN.
“When I think about why these prizes exist, it’s to compete with state-supported athletes from other countries,” Dr. Steven Gill, a tax professor at San Diego State University, told CNN. “Cutting taxes isn’t going to fix the fact that these athletes don’t get paid enough—it’s a short-term fix.”