Should Olympic medals be subject to tax?

[Llama Llogophile]

Saw this on a friends Facebook page:

Go for the Gold! (Pay the IRS)

And here's a another opinion on the issue

Basically, if you win an Olympic medal you get a monetary award: $25k for a gold, $15k for silver and $10k for bronze. That's apparently taxable income in the United States. It seems some feel it shouldn't be. I don't have a fully formed opinion on this yet, but I'm leaning toward, "Fine, tax the medals, I don't really care." Olympic athletes do put in a lot of work and make sacrifices for their sport, but I'm not sure this is sufficient reason to get out of paying taxes on their winnings.

[Simplicio]

I put a lot of work and make sacrifices to do my job, but I still have to pay taxes on my remuneration. I don't see why Olympians should be any different.

Plus I like the quote form Rubio in the second article. He complains about how complicated the tax code is, and then immediately suggests.....adding another special case exemption to the tax code.

[runner pat]

I have never heard of a payment accompanying a medal. Sounds false to me.

ETA: I was wrong.

Snopes

[Simplicio]

Originally Posted by runner pat

I have never heard of a payment accompanying a medal. Sounds false to me.

ETA: I was wrong.

Snopes

The money comes from the USOC, not the Olympics itself.

(Which makes the Weekly Standard article misleading, since they say athletes from other countries don't have to pay taxes on their prizes since their countries don't asses tax on foreign income, but other athletes don't get cash prizes from the US OC.

Its also misleading because it makes it sound like this is some special tax on Olympic prizes, but its just the usual tax on prizes in general.

Its also misleading because the numbers given assume the Olympians are in the top tax bracket. I don't know what the average income of someone in the Olympics is, but I doubt your average discus thrower is pulling in 250k a year.

Do people really pay to read the Weekly Standard?)

[GIGObuster]

Snopes marks it partly true, Politifacts marks it Mostly False.

http://www.politifact.com/truth-o-me...-owe-9000-irs/

We will also note that ATR said "winners will owe up to $9,000" -- a phrase that gives the group leeway for its estimates.

Still, the experts we spoke to suggested that a $9,000 tax payment was unrealistically high. For most athletes, the payment will be less, and possibly quite a bit less. Here’s why:

Business expenses

An athlete who wins a medal bonus would be free to deduct any unreimbursed expenses from the bonus, lowering -- or maybe even eliminating -- their tax hit. In fact, accountants say an athlete would be crazy not to.

"Anything used for the production of income is deductible," said Brad Bell, a partner with BGBC Partners LLP in Indianapolis who specializes in accounting for athletes.

Greg Shafer, an accountant in Colorado Springs, Colo., added that "if they were my client and had to pay that kind of tax, I would say, ‘Well, what are your ordinary and necessary expenses?’ That could be travel, uniforms, cell phone use." The U.S. Olympic Committee is based in Colorado Springs, and Shafer said he has provided accounting services to athletes.

So expenses for gymnasts might include tumbling classes, payments to coaches and travel costs to international meets. Cyclists would pay for new bikes and maintenance. An Olympian fencer told Forbes.com that her expenses for equipment and competitions run around $20,000 per year.

[TriPolar]

It should be treated as income, because it is. They can deduct the business expenses just like any other. I assume there's already some exception to cover the value of the medals.

[Whack-a-Mole]

Originally Posted by TriPolar

It should be treated as income, because it is. They can deduct the business expenses just like any other. I assume there's already some exception to cover the value of the medals.

^^ This.

You get an income. You pay taxes on that income. The government does not give a hoot about how you earned the income in general (illegal sources would be a problem).

Seems pretty normal and straightforward to me.

If the government wanted to give its athletes a break it can easily pass a law that exempts Olympic money earned from from being taxed.

[the_diego]

It depends. Several countries zero-rate earnings made abroad. So that's a disadvantage to the host country's athletes.

[Whack-a-Mole]

Originally Posted by the_diego

It depends. Several countries zero-rate earnings made abroad. So that's a disadvantage to the host country's athletes.

Not sure what "zero rate" means but Americans think it is an Olympic rule that athletes be non-professional/amateurs (i.e. not their job, not paid).

That is an American rule and not sure how much a rule it is anymore (thinking basketball).

If other countries want to pay their athletes a gazillion dollars there is no rule against it.

If those countries want to tax their athlete's earnings again that is up to them.

[Jas09]

Yeah, I don't really get this. Don't Nobel Prize winners pay taxes on that as well? International sports stars?

It's income - why shouldn't it be treated the same as all other income earned abroad?

[Ravenman]

For those who think that Olympians should not be subject to the income tax for these winnings, do you believe that the Super Bowl champions should also be exempt? I see here that players tend to get a post-season bonus in the $150,000-$170,000 range, not to mention the ring.

And I reiterate the question about Nobel Prize winners being taxed -- I seem to recall that some people were chagrined that Obama could donate all of his prize money to charity and not pay any taxes on it. Should Nobel Prize winnings be taxed or not?

[TriPolar]

Originally Posted by Whack-a-Mole

^^ This.

You get an income. You pay taxes on that income. The government does not give a hoot about how you earned the income in general (illegal sources would be a problem).

Seems pretty normal and straightforward to me.

If the government wanted to give its athletes a break it can easily pass a law that exempts Olympic money earned from from being taxed.

Except I heard on the news this morning that they are taxed on the value of the medals. Maybe that was some airhead screwing up the facts though. I wonder if military medals and the like are taxed like that, or if it's true. Either way, I think Olympic medal winners would usually have offsetting expenses, or in many cases now-a-days they're already making plenty of money so they could afford it.

[runner pat]

Originally Posted by TriPolar

Except I heard on the news this morning that they are taxed on the value of the medals. Maybe that was some airhead screwing up the facts though. I wonder if military medals and the like are taxed like that, or if it's true. Either way, I think Olympic medal winners would usually have offsetting expenses, or in many cases now-a-days they're already making plenty of money so they could afford it.

Wouldn't be much, the gold is only worth $644 metal value. It's almost all silver with 6 grams of gold plating.

[TriPolar]

Originally Posted by runner pat

Wouldn't be much, the gold is only worth $644 metal value. It's almost all silver with 6 grams of gold plating.

Cheap bastards.

[Really Not All That Bright]

Originally Posted by Ravenman

For those who think that Olympians should not be subject to the income tax for these winnings, do you believe that the Super Bowl champions should also be exempt?

This. If Tiger Woods had won the Open I don't think anyone would be demanding that his $1.5 million prize be tax-exempt.

[runner pat]

Originally Posted by TriPolar

Cheap bastards.

It would get real expensive real fast if it was solid gold.

Olympic Medals

Shape: Usually circular, featuring an attachment for a chain or ribbon
Diameter: A minimum of 60 mm
Thickness: A minimum of 3 mm
Material:

First place: It is composed of 550 grams of silver (at least 925 grade) covered with 6 grams of pure gold (worth approximately $800 as of July 29,2012).
Second place: It has the same composition as the first place medal without the gilding (worth approximately $500 as of July 29, 2012). [9]
Third place: It is mostly copper with some tin and zinc (worth approximately $3).[10]

Just the 28 gold medals needed for mens track and field would be about $750,000 or more. Think of the cost and the security needed to cover all the medals for every event.

[TriPolar]

Originally Posted by runner pat

It would get real expensive real fast if it was solid gold.

Olympic Medals


Just the 28 gold medals needed for mens track and field would be about $750,000 or more. Think of the cost and the security needed to cover all the medals for every event.

It's a drop in the bucket compared to the rest of the costs involved in the Olympics and the sponsorship and appearance deals some athletes make. Some of those athletes won't ever make much money from their sport. Now the medal itself should be an honor no matter what it's made from, so I'm not going to carry this point very far. I'd rather complain about humans winning medals in events where the horses are the athletes.

[runner pat]

Originally Posted by TriPolar

It's a drop in the bucket compared to the rest of the costs involved in the Olympics and the sponsorship and appearance deals some athletes make. Some of those athletes won't ever make much money from their sport. Now the medal itself should be an honor no matter what it's made from, so I'm not going to carry this point very far. I'd rather complain about humans winning medals in events where the horses are the athletes.

I can agree with that. There have been a few riders in their 70s in the past.

[Fiddle Peghead]

Originally Posted by runner pat

I have never heard of a payment accompanying a medal. Sounds false to me.

ETA: I was wrong.

Snopes

From this link, it seems Italy pays $182,000 for a gold medal, Russia pays $135,000, and Ukraine pays $100,000, while the US only pays $25,000. As a proud American, I say this CANNOT STAND!

USA! USA! USA!

[Shodan]

I doubt the US women's gymnastics team is going to be hurting for money anytime soon, no matter how much the Russkis pay their girls.

Regards,
Shodan

[kanicbird]

Originally Posted by Simplicio

I put a lot of work and make sacrifices to do my job, but I still have to pay taxes on my remuneration. I don't see why Olympians should be any different.

Just because you are being unfairly screwed not all believe that everyone should be unfairly screwed.

[TriPolar]

Originally Posted by kanicbird

Just because you are being unfairly screwed not all believe that everyone should be unfairly screwed.

Well I do. It's not fair if we're not all unfairly screwed.

[Jackknifed Juggernaut]

Wouldn't Olympic medals have appraised values of quite a bit more than $800? I suspect that people would probably pay much more than $800 on eBay for a genuine gold medal. When someone catches a record-breaking home run, they aren't taxed on the $10 ball, but on the appraised market value of the ball.

[Snowboarder Bo]

Originally Posted by kanicbird

Just because you are being unfairly screwed not all believe that everyone should be unfairly screwed.

I must have missed the part of Samplico's post where he said he thought he was being screwed at all, let alone unfairly screwed. Maybe kanicbird will quote that part when he comes back. And bring pie.

[the_diego]

Excise, value-added, ad valorem taxes are set at 0% when earned abroad or through export. That's the rule for several countries (mine included.) Now when it comes to income tax derived abroad, its the host country's prerogative to tax you. Your own country should not, maybe just transfer charges when bringing in your earnings from abroad.

[chizzuk]

Originally Posted by the_diego

It depends. Several countries zero-rate earnings made abroad. So that's a disadvantage to the host country's athletes.

Not in this case: the UK gives nothing for medals, so the athletes don't have to pay any tax on them. So there!

Another data point: South Africa pays R400,000 (about $50,000) for gold medals, meaning Chad Le Clos made twice as much money beating Phelps as Phelps would have had the results been flipped. Not that I imagine Michael Phelps needs any money.

[Sam Stone]

If you want to be perfectly fair with the taxes, then the Olympic medal should be taxed at its market value, not its raw material value. If I enter a contest and win, say, a Salvador Dali painting, I'm not going to be taxed on the value of the ink and canvas - I'll be taxed on the market value of the painting.

So how much is an Olympic gold medal worth? You'd have to look at all the ones that have been auctioned off or sold privately to establish a value. For example, American swimmer Anthony Ervin sold his Olympic gold medal for $17,100. Australian double-gold medalist Bobby Pearce's Olympic memorabilia, including his two gold medals, recently went up for auction with a pre-sale estimate of £30,000 – 50,000. I think it's safe to say that a really famous gold medal would attract a lot more money.

This is probably a very complex issue - you can't know the value of the medal without looking at its context. A gold medal won in Berlin in 1936 might be worth a lot more than one from Tokyo. If an athlete wins multiple medals and therefore gains fame, the value of each one goes up. Hell, circumstances could drive up the value of a medal long after the athlete is home. So I'm not sure how you could figure out a new medal's market value for taxation purposes.

I've heard stories about people winning big contests, being taxed on the merchandise's new value, and then being unable to sell it for the amount of the tax and actually losing money. If average folks can get hammered by the tax man, so should Olympic athletes.

[magellan01]

Originally Posted by TriPolar

It should be treated as income, because it is. They can deduct the business expenses just like any other. I assume there's already some exception to cover the value of the medals.

I agree with this. I can't see a reason why it should not be taxed. Earnings are taxed. Prizes and awards are taxed. Why not this?

[runner pat]

Originally Posted by magellan01

I agree with this. I can't see a reason why it should not be taxed. Earnings are taxed. Prizes and awards are taxed. Why not this?

There is the fact that there's a certain amount of national and political strutting over medals won, maybe they should be exempt as "we" take some of the credit for winning.

[magellan01]

Originally Posted by runner pat

There is the fact that there's a certain amount of national and political strutting over medals won, maybe they should be exempt as "we" take some of the credit for winning.

That's a possibility. But I just wouldn't tax the medals themselves. I'd tax the winnings. And if they want to raise the amount so the net take away is, e.g., $25,000, that's fine. There's not a lot of money involved here, so it's not about revenue, it's really about principle. After thinking about it, I think the difference between the Olympics and things like the Superbowl is that Olympic athletes are representing the country. Either way, I don't really have strong feelings about it.

[jackdavinci]

For any actual monetary prize, sure, that's taxable income. Unless we start doing like other countries and make lottery winnings untaxable. For the actual medals, no, unless they sell it and then only tax it on what they sell it for. I think in general, physical prizes should not be taxed until they are sold, since you can't break of 10% of a car to send to the IRS.

[Really Not All That Bright]

What countries make lottery winnings tax-free?

[pulykamell]

Originally Posted by Really Not All That Bright

What countries make lottery winnings tax-free?

The UK, for one, unless things have changed.

[Really Not All That Bright]

Huh. So they do. I was there when the National Lottery started and I don't remember that at all.

[Simplicio]

Originally Posted by Sam Stone

If you want to be perfectly fair with the taxes, then the Olympic medal should be taxed at its market value, not its raw material value. If I enter a contest and win, say, a Salvador Dali painting, I'm not going to be taxed on the value of the ink and canvas - I'll be taxed on the market value of the painting.

The difference is that the Olympic medal is worth more then its raw materials + labour because the Olympian won it. If the IOC struck a bunch of extra medals just to sell directly, they wouldn't be worth more then a couple hundred bucks. People are interested in paying more for the medals because the medals were owned by an Olympian. The IRS doesn't tax people for value they themselves add to a good.

After all, if Dali himself was given paints and a canvas as a gift, he wouldn't have to pay thousands of dollars of taxes on them, even though he can turn them into a product worth that much. He's the one adding the value, not the person who gave him the materials.

Or if I give Justin Beiber a toothbrush, he doesn't have to pay hundreds of dollars of tax on it, even though he can probably turn it around and sell it to some shrieking fan for many times its original value. Its only that valuable because Bieber owned it.

[TriPolar]

This value of the medal stuff can get ridiculous. I imagine the hair on Justin Biebers head could be sold for thousands of dollars. Does he pay taxes on that? Well actually he's Canadian so I guess it's worth millions of nutjobs whackbrains loonies.

[sachertorte]

Do people who catch a famous baseball really have to pay taxes on it, even if they keep it? I thought they would only have to pay taxes if they sold it. I believe the term is unrealized capital gain (keep it) versus realized capital gain (sell it).

I'm fine with taxing olympian's prize winnings as income. Why would the country do anything else?

[Really Not All That Bright]

They pay taxes on it when they sell it. It's distinguished from winning something in that catching a baseball is legally considered to be claiming abandoned property, rather than accepting a gift.

[jtgain]

I think this will be a first for me: supporting a tax. I admire everything these athletes do, but if you are a good carpenter or architect and get paid $25k because of what you did, you pay taxes on that money.

Before this started, I didn't know that the USOC paid athletes a stipend for winning a medal. Sure that should be taxed. Why not?

[Simple Linctus]

Originally Posted by Really Not All That Bright

Huh. So they do. I was there when the National Lottery started and I don't remember that at all.

ALL Gambling winnings in the UK are tax free so I don't think there was an exception for it, it was just the law being applied. But equally, gambling losses are not tax deductable.

This was "before my time" but I understand at one time when you placed a bet at the bookies you had a choice of paying tax then on the stake of about 10%, or paying no tax and if you won then paying tax on the full winnings of the same figure. That was abolished before I was old enough to legally gamble.

[Sitnam]

No. The nations involved invest a serious amount of money into the representatives who are battling for the honor of their nation.

Should we have subjected Apollo 11 to an import tax for the moon rocks?

[Smapti]

Originally Posted by Sitnam

Should we have subjected Apollo 11 to an import tax for the moon rocks?

Are Olympic athletes now officers of the Armed Forces?

[TriPolar]

Originally Posted by Smapti

Are Olympic athletes now officers of the Armed Forces?

Some have been.

[Sitnam]

Originally Posted by Smapti

Are Olympic athletes now officers of the Armed Forces?

Are Olympic athletes funded by the nations they represent?

[Whack-a-Mole]

Originally Posted by Sam Stone

If average folks can get hammered by the tax man, so should Olympic athletes.

While in general I agree with this I would submit that Olympic athletes are, in theory, a bit different from your average wage earner.

It may be argued that they are sent to the Olympics to represent their country. Put another way they are not there for their own aggrandizement but to represent their country and bring it glory (in reality I think it is both).

As such the country they represent penalizing them if they win would seem odd to say the least.

That said there is a good Salon article which points out why all this is mostly much ado about nothing:

<snip>

First off, the medals aren’t subject to taxes. Mark Jones, the communications director for the U.S. Olympic Committee told Salon in an email, “There is no ‘value’ to medals and there is no tax associated with it.”

<snip>

As for the prize money, according to Politifact, ATR’s claim is “mostly false.” Consulting accountants who have worked with athletes, the fact-checking website noted that while the money is certainly taxable, athletes could deduct all the expenses that went into getting them to the podium, including travel costs, equipment, training and coaching fees from the previous year. Those are all considered business expenses, and could lower or even eliminate an athlete’s tax liability, depending how much they spent. Moreover, the 35 percent rate assumes athletes are in the highest income bracket, earning over $380,000 a year. While some Olympians certainly make millions, the majority of athletes probably do not. Many are barely scraping by, lacking sponsorship deals and unable to work full-time due to training demands.

SOURCE: http://www.salon.com/2012/08/02/romn...mpic_tax_myth/

[Whack-a-Mole]

Originally Posted by Sitnam

Are Olympic athletes funded by the nations they represent?

Yes but to varying degrees.

In some cases it is their one purpose in life (their job) and they are wholly supported by their government.

In others, like the US, it is largely up to the athletes till they are officially accepted to the Olympic team for their given sport (so the athletes largely got there on their own one way or another depending on the sport...can be quite expensive for the athlete).

[Martini Enfield]

Originally Posted by Ravenman

For those who think that Olympians should not be subject to the income tax for these winnings, do you believe that the Super Bowl champions should also be exempt?

Yes, I do, basically.

And I reiterate the question about Nobel Prize winners being taxed -- I seem to recall that some people were chagrined that Obama could donate all of his prize money to charity and not pay any taxes on it. Should Nobel Prize winnings be taxed or not?

No, I don't think they should. I believe that any legitimate "Winnings" that aren't an expected part of someone's job, regardless of whether they're from lotteries, gambling, sporting endeavours like the Olympics, the Nobel Prize, game shows, sweepstakes, or prize draws, should be tax free.

[jtgain]

Originally Posted by Martini Enfield

No, I don't think they should. I believe that any legitimate "Winnings" that aren't an expected part of someone's job, ...

So bonuses at work shouldn't be taxed? How is taxing an Olympic medal any different than taxing Joe Sixpack for getting a $5k bonus for being the best widget salesman in the 3rd district of Acme corporation?

[The Niply Elder]

Originally Posted by Martini Enfield

No, I don't think they should. I believe that any legitimate "Winnings" that aren't an expected part of someone's job, regardless of whether they're from lotteries, gambling, sporting endeavours like the Olympics, the Nobel Prize, game shows, sweepstakes, or prize draws, should be tax free.

And how do you figure this? Wouldnt then everyone be paid minimum wage plus huge untaxed winnings to make up the difference to their fair market salary level? Seems like a huge loophole to me.

[John Mace]

Originally Posted by Simplicio

Or if I give Justin Beiber a toothbrush, he doesn't have to pay hundreds of dollars of tax on it, even though he can probably turn it around and sell it to some shrieking fan for many times its original value. Its only that valuable because Bieber owned it.

Yep. I paid thousands of dollars for the three I own!

I say tax them on the value of the medal, and if they do sell it, then tax them on the income from the sale.