America’s Olympic athletes will no longer pay a so-called victory tax under a bill President Barack Obama has signed into law.
The IRS will now be prohibited from taxing most medals or other prizes awarded to U.S. Olympians.
The bill was passed by Congress this past summer. It applies to earnings from January 1, 2016 to January 1, 2021.
The U.S. Olympic Committee awards cash prizes to medalists, ranging from $25,000 for gold to $10,000 for bronze. Olympians were even taxed on the monetary value of the gold or silver in the medals themselves. Bronze medals from recent Olympic games have been mostly made of copper — worth a negligible amount, so it’s not taxed.
The money has been considered earned income, thus making it subject to what some lawmakers have called the “victory tax.”
Taxes are yet another burden for Olympians — the majority of whom are already struggling to get by.
The U.S. is one of the only countries that doesn’t provide government funding to its Olympians.
A handful of lucky athletes land lucrative endorsement deals. But most of them rely on small stipends from the USOC, support from local businesses or supplemental income from a day job.
The measure would, however, permit taxes on high-profile Olympians such as multiple gold medal-winning swimmer Michael Phelps.
Dr. Steven Gill, a tax professor at San Diego State University, isn’t convinced the exception for Olympians and Paralympians would change anything.
For one thing, the USOC might be tempted to reduce Olympians’ prize money, Gill said earlier this year.
He added that even tax free, American athletes get a fraction of the financial support that athletes in other countries get.
“When I think about why these prizes exist, it’s to compete with state-supported athletes from other countries,” he said. “Cutting taxes isn’t going to fix the fact that these athletes don’t get paid enough — it’s a short-term fix.”