You Win Some, You Lose Some: The Tax Consequences of Winning an Olympic Medal

By: Emma Bertsch*                                                                           Posted: 11/14/2024

Whether they are underdog athletes who shock the world, or notably talented athletes who perform to their highest capability, the United States has a history of dominant performances at the Olympic Games.[1]  But all athletes are not created equal, and when these newly crowned Olympians step off of the podium and arrive home, they are returning to various financial circumstances.[2]  There are, of course, high profile athletes that return to financially stable lives following the Olympic Games, but competitors of that nature are in the minority.[3]  These variations in athlete’s fortunes give rise to differences in how their winnings are treated by the federal income tax system.[4]  

Background: Olympic Medalist’s Earnings

Nations drastically vary in how they reward their athletes for medaling at the Olympic Games.[5]  For example, athletes representing the countries of Malaysia, Morocco, or Serbia receive a reward of approximately $200,000.[6]  Other countries, such as Italy, offer benefits such as apartments or vacation vouchers.[7]  However, athletes representing the United States receive much less for their accomplishment.[8] The United States awards their gold medalists $37,500, silver medalists $22,500, and bronze medalists $15,000.[9] The rationale behind these seemingly low rewards is that the United States earns significantly more medals than other countries.[10]

Tax Consequences of Olympic Awards

The Internal Revenue Code (“the Code”) provides that both cash and non-cash prizes constitute taxable income and are therefore subject to the federal income rate.[11]  This requirement is sometimes referred to as the “victory tax.”[12]  However, in 2016, the United States Appreciation for Olympians and Paralympians Act was signed into law, providing that athletes may exempt the value of their medals and cash bonuses from their income.[13]  However, his provision only applies to athletes who earn less than $1,000,000 per year.[14]  For example, basketball players who play both for a National Basketball Association team and for the United States Olympic Team will still be subject to the “victory tax” because they earn more than $1,000,000 per year.[15]  

The bill frictionlessly passed through Congress, earning a vote of 415-1 in the House of Representatives and a unanimous vote in the Senate.[16]  The codification of this Act is found in Section 74(d) of the Internal Revenue Code.[17]  Additionally, Section 72(d)(2) states the limitations based on gross income, providing that, as stated above, the exemption does not apply if the taxpayer has gross income that exceeds $1,000,000.[18]  

In promulgating the bill’s passage, the Committee on Ways and Means (“the Committee”) emphasized that the tax, as originally provided in the Code, imposed an unfair burden upon athletes and could possibly disincentivize participation in the Olympic Games.[19]  Additionally, the Committee believed that, by representing their country on an international stage, athletes are performing a patriotic service, which should be rewarded with beneficial tax treatment.[20]  Financially, the Committee recognized that athletes may earn a de minimis amount of money from the participation in their sport and often must seek alternate employment.[21]  The Committee’s arguments were echoed by several politicians; for example, Senator Chuck Schumer, in announcing the bill’s passage, explained that athletes who work hard and volunteer to “represent their country on the world’s stage” should have their sacrifices recognized in the form of a tax exemption^.[22]

This exemption creates a substantial and necessary effect on athletes that fall under the $1,000,000 threshold.[23]  Without it, an athlete who wins a gold medal and thus, receives $37,500 from the United States Olympic Committee, could lose a significant amount of these earnings to federal taxes.[24]  For athletes who rely on these funds to support themselves, a tax reducing the amount they receive is a detrimental blow to their financial situation.[25] 

Does the Act Permit an Unequal Treatment of Prizes?

While most Olympians will be permitted to exempt their winnings from gross income, the recipients of other rewards, such as Nobel Prize Winners, are still required to include those funds in their gross income.[26]  Thus, it could be argued that it is unfair that while Olympic athletes train with the goal of winning an Olympic medal in mind, winners of merit awards receive them without seeking them.[27]  Therefore, while Olympic athletes who make less than $1 million can simply avoid the inclusion in gross income, Nobel Prize winners are left to do tax gymnastics to exempt as much of their reward from gross income as possible.[28]  This indicates that one issue with the 2016 Act is that it causes the Code to unfairly treat various types of prizes differently.[29]

Looking Forward

Starting at the Paris Summer Olympic Games, World Athletics, the international sports governing body awarded $50,000 to athletes who won gold medals in their respective track and field events.[30]  This reward regime is likely to be expanded at the 2028 Los Angeles Summer Olympic Games by awarding money to silver and bronze medalists as well.[31]  This implementation and likely subsequent expansion is a demonstration of World Athletics commitment to empower athletes.[32]  However, because Section 74(d) only exempts prizes awarded by the United States Olympic Committee, these added rewards will likely be required to be included in gross income and thus, subject to federal income tax consequences.[33]  The effect of this inclusion increases the taxpayer’s gross income, which in turn places the individual in a higher tax bracket.[34]  Amending the current Act to include these prizes may be a difficult endeavor because, although the reasoning behind the original exemption applies, the new system only affects one group of athletes.[35]  Therefore, an amendment could further discombobulate the treatment of prizes under the code and exacerbate the question of some prizes are taxed while others are not.[36]

*Staff Writer, Jeffrey S. Moorad Sports Law Journal, J.D. Candidate, May 2026, Villanova University Charles Widger School of Law.

[1] See Greg Prato, The Top 10 Moments in U.S. Olympic History, Rolling Stone (July 26, 2012), https://www.rollingstone.com/culture/culture-lists/the-top-10-moments-in-u-s-olympic-history-161854/honorable-mention-muhammad-ali-lights-the-torch-atlanta-1996-40421/ (recounting memorable moments in United States Olympic history).

[2] See Going for Gold: The Financial Hurdles Facing Olympic Athletes, Wall St. J. (Aug. 11, 2024, 3:01 AM), https://www.wsj.com/podcasts/your-money-matters/going-for-gold-the-financial-hurdles-facing-olympic-athletes/0ded9eab-6981-4d35-9d75-d28ab9bdb14f#:~:text=A%20recent%20report%20on%20elite,fees%20involved%20with%20their%20sport (summarizing report stating, on average, elite American athletes were poorer for having competed in Olympic Games).  On average, athletes incur a net cost of about $12,000 per year due to the expenses and fees associated with participating in their sport.  See id. (stating cost of competing in Olympic Games); see also Caryn Maconi Lawler, How Much Does it Cost to Make an Olympian?, Triathlete (Apr. 26, 2023) https://www.triathlete.com/events/olympics/how-much-does-it-cost-to-make-an-olympian/ (describing cost Olympic triathletes incur in preparation).  Several necessary components of becoming an Olympic triathlete, such as coaching, equipment, travel, and nutrition, can quickly accumulate to a cost of $100,000 per year.  See Lawler, supra note 2 (noting commonality of incurring substantial costs in becoming elite athlete).

[3] See Going for Gold: The Financial Hurdles Facing Olympic Athletes, supra note 2 (noting financial sacrifice that most athletes make to compete in Olympic Games).

[4] See Mitchell S. Halpern, Do Olympians Pay Taxes on Their Medals?, Kahn, Litwin & Renza (July 22, 2024), https://kahnlitwin.com/blogs/tax-blog/do-olympians-pay-taxes-on-their-medals (discussing how much tax Olympians owe on their winning); see also Zoe Thomas, For US Olympians, Gold Medals Come with a Hefty Tax Bill, BBC (Aug. 17, 2016) https://www.bbc.com/news/business-37099066 (describing tax consequences of Simone Biles after 2016 Summer Olympic Games).  In 2016, Biles won four gold medals, receiving $25,000 per medal, and one bronze receiving $10,000.  See Thomas, supra note 4 (stating rewards for medals United States provided athletes in 2016 Summer Olympics).  Additionally, due to Biles’s $2 million in endorsement deals that she held at that time, she would be placed in the highest income tax bracket, subjecting her to a tax bill of approximately $43,560.  See id. (providing mechanisms of Biles’s tax consequences because of her awards and endorsements).

[5] See Tom Schad, How Much Money U.S., Other Countries are Paying Olympic Medalists at Paris Games, USA Today (July 18, 2024, 3:12 PM), https://www.usatoday.com/story/sports/olympics/2024/07/15/how-much-are-olympic-gold-medalists-paid/74021022007/ (describing variation in countries’ payment to their athletes).

[6] See id. (describing reward for athletes in Malaysia, Morocco, and Serbia).

[7] See id. (describing alternative forms of compensation for medaling at Olympic Games).

[8] See id. (noting significant discrepancy between United States and other nations in rewards they provide).

[9] See Halpern, supra note 4 (discussing rewards United States provides athletes).  These awards are only included in an athlete’s gross income and thus, taxable, if the athlete’s gross income exceeds $1 million.  See id. (noting that for most athletes, earnings from medals are tax-free).  For further discussion of the tax consequences of Olympic medals, see infra notes 11–33 and accompanying text.

[10] See Schad, supra note 5 (explaining rationale behind United States’ prize money).

[11] See Christina Lewellen & Nathan Goldman, The Tax Implications of Olympic Prizes, Poole Thought Leadership (July 29, 2024), https://poole.ncsu.edu/thought-leadership/article/the-tax-implications-of-olympic-prizes/ (noting requirement of prizes in income tax); see also 26 U.S.C. § 74(a) (1986) (stating gross income includes amounts received as prizes and awards).

[12] See Scott C. Cashman, Don’t Tax Yourself, Bowditch (Aug. 6, 2024), https://www.bowditch.com/estateandtaxplanningblog/2024/08/06/olympic-medals-and-income-tax/ (noting nickname given because U.S. tax code requires individuals to include prizes and awards in gross income).

[13] See Halpern, supra note 4 (describing effect of United States Appreciation for Olympians and Paralympians Act).

[14] See id. (describing limitation of Act); see also Sally P. Schreiber, Olympic Tax Break Enacted, J. of Acct. (Oct. 10, 2016), https://www.journalofaccountancy.com/news/2016/oct/olympic-tax-break-201615326.html (noting for married couples who file separate tax return, limit is $500,000).  However, the $1 million limitation does not apply when calculating adjusted gross income for purposes of various Code provisions including, the taxability of Social Security benefits.  See Schreiber, supra note 14 (noting several instances in Code where $1 million limitation does not apply).

[15] See Schreiber, supra note 14 (providing example of situation in which victory tax still applies).

[16] See Cody Walls, Olympian’s Medal and Money Exemption: How Congress’s Addition to Internal Revenue Code Section 74 Does Very Little for Very Few, 43 S. Ill. Univ. L.J. 463, 476 (2019) (noting ease of passing bill).

[17] See id. at 463 (noting codification of Act in Internal Revenue Code); see also 26 U.S.C. § 74(d) (2016) (stating value of medals as well as cash prizes can be excluded from gross income).

[18] See 26 U.S.C. § 74(d)(2)(A) (2016) (stating §74(d)(1) does not apply if Olympian earns more than $1,000,000 of adjusted gross income).

[19] See Walls, supra note 16, at 476 (indicating effect of tax on athletes’ participation in Olympic Games).  “The bill was meant to provide an incentive for athletes to represent the country on a global scale at the Olympics.”  See id. (stating purpose of bill).

[20] See id. (describing patriotic nature of athletes’ Olympic performance).

[21] See id. (describing financial situations that prompted bill’s creation).

[22] See Press Release, Chuck Schumer, Schumer Bill Exempts US Olympic and Paralympic Athletes from Paying Taxes on Medals and Prize Money from the Olympic Games in Rio and in the Future (Sept. 30, 2016), https://www.schumer.senate.gov/newsroom/press-releases/schumer-with-passage-of-bipartisan-legislation-team-usa-winners-no-longer-have-to-pay-a-victory-tax-senator-announces-passage-of-bill-that-will-finally-block-irs-from-taxing-olympic-medals-bill-now-heads-to-presidents-desk-for-final-signature (advocating for favorable tax treatment of Olympians).

[23] See The Exclusion from Income of Olympic Prize Money; A Win for Athletes, NRI Tax Grp. (July 23, 2024), https://www.nritaxgroup.com/blog/the-exclusion-from-income-of-olympic-prize-money-a-win-for-athletes/46180 (describing impact of exemption).  “Without the tax exemption, a gold medalist earning $37,500 could see a substantial portion of their prize money–up to 37%–go to federal taxes.”  See id. (explaining how much of prize money could be taken from athlete by tax on prizes).

[24] See The Exclusion from Income of Olympic Prize Money; A Win for Athletes, supra note 23 (providing example of unfavorable effect of § 74(a) without exemption).

[25] See id. (noting harmful consequences of including Olympic rewards in gross income).

[26] See Stephen Fishman, Are Merit Awards Taxable?, Nolo, https://www.nolo.com/legal-encyclopedia/are-merit-awards-taxable.html (last visited Oct. 28, 2024) (noting inclusion of merit awards in gross income).

[27] See id. (indicating unequal treatment of different awards).

[28] See The Exclusion from Income of Olympic Prize Money; A Win for Athletes, supra note 23 (describing possible exemption if taxpayer claims charitable deduction).  “One strategy is to cash the check, disburse the funds to your selected charity or charities, and deduct the amount as a charitable contribution.”  See id. (describing method of avoiding inclusion under charitable contribution).

[29] For further discussion of the Code’s different treatment of prizes, see supra notes 26–28 and accompanying text.

[30] See The Exclusion from Income of Olympic Prize Money; A Win for Athletes, supra note 23 (describing new developments in Olympic reward system); see also Rachel Axon, World Athletics Introduces Prize Money Pool for Paris Gold Medal Winners, Sports Bus. J. (Apr. 10, 2024), https://www.sportsbusinessjournal.com/Articles/2024/04/10/world-athletics-prize-money-track-and-field-olympic-competitions (noting World Athletics’ recognition that track and field athletes typically make most earnings through endorsement deals).

[31] See The Exclusion from Income of Olympic Prize Money; A Win for Athletes, supra note 23  (noting likely expansion of World Athletics’ rewards).

[32] See Press Release, World Athletics, World Athletics Introduces Prize Money for Olympic Gold Medalists (Apr. 10, 2024), https://worldathletics.org/news/press-releases/world-athletics-introduces-prize-money-for-olympic-gold-medallists [hereinafter World Athletics Press Release] (noting reasoning behind new reward system).  “This is the continuation of a journey we started back in 2015, which sees all the money World Athletics receives from the International Olympic Committee for the Olympic Games go directly back into our sport.”  See id. (quoting World Athletics President, Sebastian Coe).

[33] See 26 U.S.C. § 74(d) (stating that gross income shall not include value of any medal or prize money awarded from United States Olympic Committee if athlete makes over $1,000,000).

[34] See Amy Fontinelle, Can Moving Into a Higher Tax Bracket Cause Me to Have a Lower Net Income?, Investopedia (Oct. 27, 2024), https://www.investopedia.com/ask/answers/071114/can-moving-higher-tax-bracket-cause-me-have-lower-net-income.asp#:~:text=Increasing%20your%20income%20might%20move,the%20previous%2C%20lower%20tax%20bracket. (describing effect of increase in gross income).

[35] See World Athletics Press Release, supra note 32 (indicating limitation of new award to athletes that win gold medals only); see also Tyler Dragon, Prize Money for Track & Field Olympic Gold Medalists is ‘Right Thing to Do,’ USA Today (Aug. 1, 2024), https://www.usatoday.com/story/sports/olympics/2024/08/01/track-field-prize-money-paris-olympics/74630170007/ (noting criticism of new system from Olympic sport bodies).

[36] For further discussion of the issue of prize treatment under the Code, see supra notes 26–28 and accompanying text.