Olympic athletes often give up a lot to pursue their sport. They may delay college, marriage, children or "real" jobs. They train and practice long and hard with the hope of getting a gold, silver or bronze medal. However, when they win that medal, they come home to a tax bill. That hardly seems fair does it?
According to multiple reports, there is a Congressional tax bill afoot, and a California counterpart, that would make the cash award which comes with winning an Olympic medal exempt from taxes. Currently, the medal awards are $25,000 for gold, $15,000 for silver and $10,000 for bronze which should be reported under "other income."
Some of our legislators seem to feel that given all the sacrifices made by Olympic athletes, that the least we can do for them is give them a tax break. The Congressional bill is sponsored by Republican Senator Marco Rubio (S. 3471) and is called the Olympic Tax Elimination Act. President Obama said he would sign it if it passes. In California, AB 1786 has bi-partisan support in the Assembly and may also pass.
The counter-argument for passage of this legislation is that it will send us down the slippery slope of every award winner wanting their cash awards tax free. What about the $1 million or more for a Nobel peace prize, or the celebrity swag that is given out to Oscar nominees?
It seems that the Olympic medals are different, especially as we bask in the glow of so many well-deserved awards. When in doubt, check with your legal tax professional to see what is allowed.
Source: Forbes, "Even Broke California Joins Tax-Free Olympics Movement," Robert W. Wood, Aug. 11, 2012
At our San Francisco Bay law office, we represent clients with IRS issues including tax litigation and audits.