IRS Wins Big at 2016 Summer Olympics
With the exciting 2016 Summer Olympics not too far behind us, the thrill of victory for the American athletes may be diminishing slightly. What’s probably coming up for many of them though is the tiring topic of taxes.
Just how much of their wins will they have to turn over to Uncle Sam?
It’s hard not to wonder specifically about Michael Phelps who won five gold and one silver medal in Rio. Fortunately, I wasn’t the only person wondering about this. Time.com published a piece in their Money section that I happened to come across.
They report that Phelps’ income tax bill for his winnings could be as much as $55,000.
The IRS considers any prize money as taxable income. It doesn’t matter whether you hit the jackpot in Vegas, win a Nobel Prize or Olympic Silver, Bronze or Gold.
In addition, the United States Olympic Committee awards Olympic athletes who place in the top three spots a bonus— $25,000 for gold, $15,000 for silver and $10,000 for bronze.
According to the Time.com Money article, “The IRS’s “victory tax” can claim a big piece of an athlete’s prize. For an Olympian in the top tax rate bracket of 39.6%, which includes the nation’s highest earners, the bill totals $9,900 for winning a gold medal, according to Americans for Tax Reform. Nabbing a silver medal triggers a $5,940 tax hit and for a bronze medal it is $3,960.”
Uncle Sam May Not Be Able to Tax Olympic Wins in 2020
I’ve been aware of a movement to eliminate the tax on Olympic winnings. The topic was brought up after the 2012 Olympics. In fact, it was less than a month before this summer’s Olympics began, on July 12th, that the Senate passed a bill that would eliminate taxing Olympians winnings. According to Americans For Tax Reform website, “The bill called for IRS code to be changed so that the gross income of U.S. medal winners “shall not include the value of any prize or award won by the taxpayer in athletic competition in the Olympic Games.”
Before Olympic athletes can keep all of their winnings though, Congress must also vote on the issue. A similar bill has already been introduced to the House. Who knows, it could possibly be passed before the next Olympics.
Stay In Shape Physically and Fiscally
In the meantime, not only do the most talented Olympic athletes in America have to be in outstanding physical shape, they also have to learn how to get in and maintain outstanding fiscal shape. The last thing an athlete needs is the IRS distracting them from their best performance.
Have you won any money this year? It doesn’t have to be big like the Olympic athletes. The IRS always wants to share in your winnings no matter what the amount. If you have won any money and want to make sure you stay out of IRS trouble, don’t hesitate to call us.