On October 7, 2016, President Obama signed into law the United States Appreciation for Olympians and Paralympians Act (the “Act”), H.R. 5946. The Act amends Internal Revenue Code § 74, which governs the taxation of prizes and awards, to exempt “the value of any medal awarded in, or any prize money received from the United States Olympic Committee on account of, competition in the Olympic Games or Paralympic Games.” The Act gained overwhelming support, passing in the House by a margin of 415-1, with similar legislation passing the Senate unanimously
However, the highest profile athletes, such as Michael Phelps and the whole of the USA Basketball Team, don’t stand to gain from the new law, as the exemption only applies to athletes with adjusted gross income of $1 million or less (or $500,000 for those married filing separate).
Prior to the enactment of the Act, any Olympic prizes were taxed as income. This included the bonuses paid to athletes for medaling in the games, which included $25,000 for gold, $15,000 for silver, and $10,000 for bronze, and the value of the medal, estimated at $600 for gold and $300 for silver. Bronze medals are not considered to hold any value.
The new Act was made retroactive to December 31, 2015, to ensure it would apply to the Rio 2016 Olympics.