Justin Thyme is a member of the U.S. Olympic swim team and is returning from London with a gold medal in the 400 meter individual medley. After 10 years of dedicated training, Thyme secured first place when he edged out the next closest finisher by a mere .0007 seconds. After the medal ceremony, Thyme is excited to learn that U.S. gold medalists are given a cash prize by the U.S. Olympic Committee of $25,000. Thyme, however, is disappointed when told that he might have to pay $9,000 in taxes on his medal and prize. Is that the law?
Taxes on Gold Medals
Yes. Although a gold medal is not worth much in actual terms (about $655, as it is only 1% gold), The USOC awards a nice honorarium for those fortunate enough to win a medal. In the United States, gold medal winners are awarded $25,000, $15,000 for silver, and $10,000 for bronze. (While this may seem like a lot of money, it pales in comparison to the prizes awarded by other countries. An Italian who wins gold would be awarded nearly $182,000. A Russian would be awarded nearly $135,000.) While Olympic medalists do have to pay taxes on their winnings, it is unlikely that Thyme will be hit with a tax bill for $9,000. The $9,000 figure is based on the earnings of someone in the top tax bracket of 35%. This is usually not the case for Olympic athletes (forget the Kobe Bryants and Michael Phelps of the world). Also most athletes would be able to write off their prize winnings against their significant training costs expenses.
Supporting Case Law
There is legal precedent for the taxation of the medal itself. In 1963, Maury Wills (shortstop for the Dodgers) received the S. Rae Hickok Award for being named the outstanding professional athlete of the year. The award was an alligator skin belt with a gold buckle and diamonds. A lawsuit was initiated to determine whether Wills was required to report the value of the belt as income. Finding that the belt could be taxed, the court noted, “The law as it presently exists requires the foregoing conclusion. We dislike it, for we are convinced it is an inequitable result. The next step would be for the IRS to tax the gold and silver in medals awarded to Olympic Games’ winners.” Commissoner v. Wills, 411 F.2d 537 (9th Cir. 1969).
Republican Florida Senator Marco Rubio has recently proposed a bill entitled Tax Exemption for American Medalists or “TEAM” to amend the Tax Code to make the medals and cash awards tax-free. President Obama announced his support of the legislation. The legislation would apply to awards received after December 31, 2011.