Earlier this summer we highlighted the taxes that U.S. Olympic medalists could be subject to because of the U.S. Tax Code. Under federal law, the cash prizes that come with each medal ($25,000 for gold, $15,000 for silver and $10,000 for bronze) would be taxed as they would be considered income. The subject garnered a great deal of negative attention because the notion of taxing these athletes for recognition of their hard work simply did not sit well with the American public.
In light of this, Congress enacted legislation to carve out an exception to the tax code for Olympic athletes. The House of Representatives voted 416 to 1 in passing the U.S. Appreciation for Olympians and Paralympians Act and the Senate passed similar legislation in July. President Obama signed the bill into law last week. The personal sacrifices made by these athletes, often without financial help, would finally be recognized without the symbolic penalty of taxes.
Under the new law, the value of the medals and the corresponding cash prizes will be exempt from taxes if an athlete’s income is under $1 million for the tax year where they earned the medal. The law would apply retroactively to the 2016 Olympic and Paralympic games in Rio De Janeiro. However, it does not affect taxation of income Olympic athletes may earn on endorsements or sponsorships.
It remains to be seen whether similar bills will be proposed to limit taxation on other awards, such as Grammys, Emmys and Oscars for those in music, television or movies.