Olympians Pay Heavy Taxes On Medals, Bonuses and Sponsorships

When I read this, I couldn't believe it, U.S. Olympians get taxed on their medals. They also are taxed heavily at 35%, on their cash prize from winning a medal.

According to CNN, a gold medal, which is worth $650, could cost athletes about $236 in taxes. While a bronze metal, which is worth $5, could only cost an athlete $2 in taxes.

At a 35 percent income tax rate on the Olympians bonus for earning a medal, a bronze medalists will owe the IRS a total of $3,500, silver medalists will owe $5,250 and gold medalists will owe $8,750, according to Americans for Tax Reform. WOW!

Sponsorships that some of the Olympians could earn will be taxed as well. Swimming star Ryan Lochte is expected to earn six-figure bonuses from Gatorade, Speedo and other major sponsors. Michael Phelp’s 2008 $1 million sponsorship from Speedo was given to charity.

Taxes have already come under scrutiny at the Olympics. This year, under pressure from the athletes, the U.K. provided a temporary exemption for Olympians so that they would not be subject to U.K. income tax.

But in the U.S. the athletes will still be taxed since they’re taxed on their worldwide income. That means that income earned anywhere in the world – including at the Olympics – would be subject to federal income tax reporting for U.S. citizens and residents.

Here's what Alex Knight, a tax partner at Atlanta’s Habif, Arogeti & Wynne says about the tax: