The Sochi Olympics begin Friday, and Americans will be cheering on Team USA to bring home the gold (and the silver, and the bronze). But lest Olympic athletes forget, they're still responsible for paying income taxes after winning their medals.
Sure Uncle Sam is patriotic, but he won't let members of the U.S. Olympic Team keep their winnings tax-free. Champions will generally still have to report their income -- i.e., the value of their medal and the cash prize that comes with it -- and pay taxes to the IRS.
With the IRS rolling out revised tax brackets for the 2014 tax year, how much will medalists potentially have to pay?
Calculating Taxes for a Medal
To figure out the taxes for winning a single medal, we'll need to know the value of a medal and the tax rate for various income levels.
For U.S. athletes, prize money varies depending on the type of medal they win. This year, it's $25,000 for a gold medal, $15,000 for silver, and $10,000 for bronze, according to Radio Free Europe/Radio Liberty. That's apparently unchanged from the Summer Games in 2012.
The bad news for athletes: The IRS' tax brackets for 2014 call for a slightly higher tax rate for the highest income earners, compared to what Olympic medalists in 2012 had to pay. In 2012, the highest income earners fell into a 35 percent tax bracket. For the 2014 tax year, the highest earners will fall into a 39.6 percent tax bracket, Forbes reports.
Potential Taxes by Medal Type
With the lowest and highest tax brackets in mind, here's a breakdown of the minimum and maximum taxes that U.S. Olympians may have to pay for winning a single medal:
- Gold medalists: A gold medal comes with $25,000 in prize money, which automatically places winners in at least the 15 percent tax bracket, regardless of their filing status. So gold medalists will likely have to pay at least $3,750 in taxes for a medal, or as much as $9,900 if they're in the highest (39.6 percent) tax bracket.
- Silver medalists: A silver medal comes with $15,000 in prize money, which automatically places winners in at least either the 10 or 15 percent tax bracket (depending on their filing status). So silver medalists will likely have to pay at least $1,500 or $2,250 in taxes for a medal; if they're in the highest tax bracket, they'd owe $5,940.
- Bronze medalists: A bronze medal comes with $10,000 in prize money, which places winners in at least either the 10 or 15 percent tax bracket (depending on filing status). So bronze medalists will have to pay at least $1,000 or $1,500 for a medal; the upper tier will owe $3,960.
Of course, just like other taxpayers, U.S. Olympians may be able to claim deductions and otherwise try to reduce their overall tax bill. So after medaling in their sport, they may want to go for the gold by consulting an experienced tax lawyer.
A final note on this topic: You may recall that during the Summer Olympics in 2012, some politicians proposed a bill that sought to do away with medal taxes for Olympic athletes. That bill, however, never made it out of committee, according to the Library of Congress.
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