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Taxes waiting at home for US Olympic winners

in International Business

Taxes waiting at home for US Olympic winners

Based on the US tax system, US medal-winning athletes at the Olympics have to pay tax on the prizes the win.

Their awarded money is considered taxable income the US Internal Revenue Service (IRS).

The US Olympic Committee awards USD 25,000 for gold winners, USD 15,000 for silver winners and USD 10,000 for bronze winners, which are all subject to tax. On top of that, the value of the medals themselves could be subject to tax too, adding a further USD 236, USD 135, and USD 2 respectively for gold, silver and bronze.

Florida Republican Senator Marco Rubio, introduced a bill earlier this week to the congress asking to eliminate tax on Olympic medals and prize money.

He called this an example of the “madness” of the US tax system, which according to him is a “complicated and burdensome mess.”

He criticized the US’ “world-wide” tax system, saying in most other countries there is a “territorial” system of tax and apply that tax just once-in the country where it is earned.

Meanwhile Kelly Phillips Erb, tax lawyer and blogger finds the world-wide tax system complicated and believes that the US tax system needs to be modified and most importantly simplified.

She adds that the bill proposed by Rubio further complicates the system and makes matters worse.

According to Erb, the International Olympic Committee does not award money. The winners are awarded money on the side by the national Olympic Committees in each individual country, who also set the sum. On this basis, not all countries award their Olympic winners with money. For example, UK winners get the honor of appearing on a stamp instead.

Sports Historian and Expert, on the other hand, believes that the main issue is not the tax system. The issue lies whether athletes should be awarded prize money at all at the Olympics.

“Cash incentives are just an incentive to cheat,” says Hoberman.

He believes the more money you offer, especially in poorer countries; the greater the chance an athlete will be tempted to dope.

The US has one 21 gold, 10 silver and 12 bronze medals so far at the London 2012 Olympics, with Michael Phelps winning his 17th gold medal in 100 fly before wrapping his career. Franklin Ledecky, on the other hand, is showing a bright future after breaking a world record in the backstroke.

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