Don't Mess With Taxes

Photo by Luca Dugaro on Unsplash

The 2024 Olympics, summer games version, started today with lots of men’s football (soccer to us Americans) and rugby matches on the schedule.

Most of us, though, won’t start paying close attention until Friday’s (July 26) opening ceremony. Tennis phenom Coco Gauff and NBA superstar LeBron James, stars at the professional level in their respective sports, will be the Team USA flag bearers.

Not only is Gauff the first tennis player to get the opening procession honor, at 20 she is the youngest U.S. Olympian to do so. That’s a fitting complement to veteran James, who is participating in his third Olympics.

So, it seems a good to take a look at some Olympian tax-related topics. Here are three.

Some winning athletes get a tax break: More than 5,000 medals will be awarded at the Paris 2024 Olympic and Paralympic Games. While the awards are priceless to the winners, they do have an actual monetary value.

International Olympic Committee regulations require gold and silver medals to be made out of at least 92.5 percent silver, with gold medals plated with at least 6 grams of gold. Bronze medals are made mostly of copper. Depending on the price of the metals, an Olympic gold medal may be worth more than $750.

Medalists also receive financial compensation. The U.S. Olympic and Paralympic Committee rewards gold medalists $37,500. Silver medalists get $22,500. Bronze medalists win $15,000.

In most cases where money or things of value, like Olympic medals, are involved, the Internal Revenue Service takes a cut at tax filing time. But since the 2016 enactment of the United States Appreciation for Olympians and Paralympians Act, many U.S. Olympians no longer have to pay the so-called victory tax on their medals and prize money.

The law says athletes making an adjusted gross income of $1 million or less don't owe tax on their Olympics earnings. This is a great benefit for those athletes who don't get lucrative endorsements, and instead likely spend their medal winnings (and more) on training between the games.

Paying for U.S. Olympians: If you’re wondering whether some of your tax dollars are going to U.S. Olympic efforts and winning athletes’ compensation, don’t worry. Unlike many countries, the United States does not pay our competitors.

Rather, funds for Team USA compensation, training, and other programs comes from the United States Olympic and Paralympic Committee (USOPC). The federally chartered nonprofit corporation does not receive governmental funding. USOPC is entirely privately funded through individual donations and commercial partner support.

If you’d like to support the Olympics efforts, the U.S. Olympic and Paralympic Foundation (USOPF) will gladly accept your donations.

As the committee’s fundraising arm, it is an IRS-registered 501(c)(3) nonprofit organization. That means your gifts are tax deductible if you itemize when your file your taxes.

Gambling on the games: The Olympics generate worldwide interest not just from fans of all the countries’ competitors, but also from gamblers. And there’s a lot to pique everyone’s interest.

The Paris 2024 summer games will be the largest in history. There are 329 total events in which gold medals will be awarded to about 10,500 athletes from 206 countries. While there have been more athletes at previous games, there have never been so many events.

The United States is a latecomer to legal sports betting, with the Supreme Court of the United States decision in May 2018 allowing states to decide whether to authorize sports betting within their borders. But we’ve been making up ground since.

The new gambling law was in effect for the Tokyo winter games in 2020, but states were still working through the legislative and administrative practicalities of the law. Now, more than 30 states allow some form of sports wagering, including in some cases mobile and online betting.

“While you can bet on the winner in conventional American sports like basketball and golf, the Olympics offer unique bets, such as the number of medals for each country,” write Henry Palattella and Brian Pempus for Forbes Betting.

They also note that the United States is the favorite for most gold and total medals, unsurprising say the Forbes writers since Team USA led the past seven Olympics in total medals and recorded the most gold medals in six of them.

Get your bets in on the over/under, which recently (odds are subject to change, frequently) was 41.5 for U.S. gold medals only. But also keep in mind your potential tax obligations.

If your Paris Olympics bets do pay off, remember that your gambling winnings are taxable income. When those winnings come from a state-sanctioned betting operation, the amount you took from the house will be reported to the IRS, so don’t forget to include it on your tax return.

I hope you’ve enjoyed this pre/early Olympics look at how taxes are involved. Here’s to your favorite Olympic athlete and/or team doing well and, if not bringing home the gold or silver or bronze, at least representing with grace and having fun.

You also might find these items of interest:

• Tax lessons from professional athletes
• Super Olympian Sunday 2022: Medal money, taxes, & NFL
• Record gambling revenue means more money for most states that sanction bets

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