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A Taxing Question

By Children’s Home Society of Florida Foundation

At press time this evening, the United States was embarked on a successful 2012 Olympics. The U.S. had received 90 medals — 39 gold, 25 silver and 26 bronze. Our Olympic team was on a path to receive well over 100 medals.

While each medal has very high personal value, there also is value to the tangible materials. The gold medals contain approximately $675 in materials, the silver $385 and the bronze medal value is $5. However, the U.S. Olympic Committee (USOC) also provides a cash gift for medal winners. The gift values are $25,000 for a gold medal, $15,000 for a silver medal and $10,000 for a bronze medal.

Should the Olympic winners pay tax?

The general income tax rule is that all prizes are taxable unless specifically excluded. Several Senators and Representatives have proposed that the value of the medal and USOC cash award should be excluded from taxable income.

Senator Marco Rubio (R-FL) introduced the Olympic Tax Elimination Act. It would exempt medal winners from paying tax. Rubio stated, “Athletes representing our nation overseas in the Olympics shouldn’t have to worry about an extra tax bill waiting for them back home.”

Similar bills were introduced in the House by Rep. Blake Farenthold (R-TX), Rep. Mary Bono Mack (R-CA) and Rep. Aaron Schock (R-IL).

 Expenses to Offset Income

All of the bills would exempt the medal and cash award from taxation. CPAs who have commented on the proposal note that the athletes would need to report the cash awards as income, but also could offset this income with “ordinary and necessary” expenses related to the awards. For example, the five women gymnasts who won the gold medal could take deductions for their classes, costs of coaches and their travel expenses.

Assessment

House Ways and Means Committee Chairman Dave Camp (R-MI) joined the group that favors excluding the Olympic medals from taxation. He stated, “These athletes deserve every bit of our support and appreciation for representing the United States on the world stage. Allowing our Olympians to receive and enjoy their medals and awards without having to worry about whether they can pay the taxes on their accomplishment is just one small way we can show that support.”

Conclusion

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Filed under: "Ask-an-Advisor", Taxation | Tagged: income tax, olympics 2012, Should Olympic Medal Winners Pay Tax? |