US citizens are generally required to pay taxes on their worldwide income, regardless of where they are living. If you don’t believe me, you can read all about it in IRS Publication 54 “Tax Guide for U.S. Citizens and Resident Aliens Living Abroad.” So the olympic medals and prize money obtained by American athletes — you guessed it: taxable.
The people at Americans for Tax Reform calculated the tax on each prize level:
- Bronze – tax bill is $3,502 on prize of $10,000
- Silver – tax bill is $5,385 on prize of $15,000
- Gold – tax bill is $8,986 on prize of $25,000
And that’s just the tax on the prize money associated with the medal. If our olympians really want to do things correctly, they will have to pay tax on the medal itself too.
Some think that our “amateur” athletes should get tax relief similar to that which we extend to our military personnel. They do represent the United States, but I’m not sure the public policy reasons are quite the same.