I came across an interesting article that happens to get published around Olympics Time every couple of years. Did you know that the Olympic medals that Olympians win are taxable? There is also prize money awarded for winning and that is taxable too.
Here is how it works. Say Michael Phelps wins a gold medal prize of $25,000. (Silver = $15,000 and Bronze $10,000). This could be taxable as high as 39.6% for the federal and ~6% for his state. This is a huge percentage of his earnings, close to 50%! Now take into account multiple victories and there is potential for a huge tax bill!
There are a few of important factors here. An athlete in a sport rich with endorsements will obviously be in a higher tax bracket. So Phelps’s tax issues will be entirely different from many other athletes. Also, some of the athletes participate as a hobby, and for some it is their business. So expenses can be used to offset income for many of the athletes who operate their passion as a self employed business.
The value of the medal is also taxed, and this depends on the commodities market. Current values of gold = ~$600, Silver = $300, and bronze is practically worthless. On the open market however a gold medal will be worth far more than its actual value on the open market and at the point it is sold will have capital gains tax implication for the seller.
Tune in below and listen too our chat. We really do have fun talking about money each week and hope you enjoy our weekly chats. Please reach out if you ever have any questions!
About Stu: With more than 25 years of experience as a credentialed tax professional, Stu Steinberg brings a broad depth of knowledge to his work. Stu founded Erock Tax to help provide tax strategies to individuals, families and small businesses. He uses his CPA expertise to help each client navigate their long-term debt and mortgage, gaining them the best deals and rates possible. Stu is passionate about empowering his clients through education about their tax health. He is highly energetic and brings a sense of optimism, creative problem-solving and a deep level of commitment to every Erock client.
Source: http://www.usatoday.com/story/money/personalfinance/2016/08/15/olympics-victory-tax-gold-medal/88587636/