Most of the world is currently captivated by the 2014 Winter Olympics in Sochi, Russia. We cheer on our country, chanting, “USA! USA!” We even tear up just a bit as we hear the stories of the Olympians journey to get to Sochi or the long hours of work the athletes put in to becoming champions. While I’m sure being a part of – and specifically medaling in – the Sochi Olympics is an experience that cannot be quantified, there is a dollar figure attached.
In addition to the privilege of standing on the podium, some countries, the U.S. included, give out cash bonuses to Olympians for medaling. The U.S. Olympic Committee awards $25,000 for grabbing gold. Silver medalists receive $15,000. Third place bronze medals earn $10,000. Those amounts are for EACH medal. That’s a pretty nice payday for skiing 3 minutes down a Sochi mountainside! Clearly much more goes into those victories than the 3-minute performance, but combine that with the millions in endorsements some athletes (think Shaun White) make and some of these athletes are seriously banking.
You might think that the athletes would get to keep all their winnings since they’re representing the U.S. on the world stage — alas, they do not. When the athletes win big, they will pay tax on their earnings, despite attempts by politicians since 2012 to exempt our American champions from paying income tax on their Olympics earnings. President Barack Obama and Senator Rubio, in particular, have proposed and supported this tax abatement for representing the country. The legislation has never passed.
The athletes will pay taxes on these medal bonuses at their respective tax rates. For people with the highest income – the renowned Shaun Whites and Bode Millers of the world — that bracket could be as high as 39.6 percent. There is a way to reduce their tax bill from Sochi earnings if these athletes have a good CPA on their side..
Assuming they frame their Olympic earnings as business income, they can deduct expenses to offset their winnings. Even for the amateurs who treat the sport as a hobby, expenses can still be deducted to the extent of their Olympic income. If you’ve ever registered a kid for even little league sports, you know how quickly the expenses can add up!
Sochi Olympic athletes may easily put a six-figure investment into their dreams of standing on the podium. An Olympian’s cost escalates quickly between competition fees, specialty clothing, equipment, facility rentals, slope time, coaching fees, travel to Sochi, and more. Even with a few CPA tax tricks to reduce their tax liability, their total cost to be a Sochi champion is incredibly high.