Money

2012 Olympics: Missy Franklin, Medal Winners Now Owe U.S. Tax Money

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Americans competing in the Olympics across the pond may have sore bodies and injured tendons, but there’s an added price to pay if they manage to win.

When Americans win a medal, they must pay tax. Those at the Americans for Tax Reform analyzed the details to find out just how much our country’s winners can expect to pay upon wrapping a medal around their necks.

According to the Americans for Tax Reform, an American who wins the coveted gold medal will have to pay $8,986. Silver and bronze winners can expect to pay $5,385 and $3,500, respectively.

This is particularly concerning for the younger, non-professional athletes like Missy Franklin. The swimmer is still a high school student and, at this point, owes the IRS nearly $14,000.

Keep in mind, it's not the actual medal that produces this high tax, it’s the cash prizes each winner receives with them. To honor each winner’s skill, athletes are rewarded with: $25,000 for gold, $15,000 for silver, and $10,000 for bronze. That’s not counting the “bonuses” some winners receive from their respective sports.

Some of the bonuses athletes receive are large. Wrestlers who win gold this year will receive
$250,000 extra. Those in cycling and swimming also have a chance to receive bonuses.

Unlike many other countries, America taxes “worldwide” prize income, so any monetary gain
overseas is fair game for taxation.

It’s not just the winners who have to pay up, either. If an athlete chooses to attend events with paying sponsors, they are subject to British taxes. The UK holds the highest marginal tax rate at 40 percent, exceeding America’s 35 percent. That means American athletes may end up paying more taxes than they would at home.

Sponsors tend to increase the taxable earnings even more. Yahoo! Sports reported swimmer Ryan Lochte will earn six-figures from Gatorade, Speedo, and other sponsors. Michael Phelps also receives large sponsorship deals, earning $1 million from Speedo in 2008.

Alex Knight, a tax partner at Atlanta’s Habif, Arogeti & Wynne told Reuters it’s all taxable. “It’s
no different from winning Wheel of Fortune or the lottery,” Knight said.

Some wonder if the actual medals will be taxed in the future, as they could be classified as a
gift or commodity medal. Knight recalled a tax case in 1969 that called for Maury Wills to report the Hickok Belt he won in 1962 as income.

Knight doubts the IRS will start taxing athletes for their medals, though, as he said it would likely be a “public relations nightmare.”