In this episode of the Teaching Tax Flow podcast, hosts Chris and John dive deep into the fascinating intersection of Olympic athletes and taxation. As the Olympic Games captivate viewers worldwide, this episode shifts focus to an often overlooked aspect of an athlete's journey – the tax implications of winning medals and earning prize money.

The episode begins with Chris shedding light on the monetary rewards that athletes receive from the United States Olympic Committee (USOC) and introduces the Olympians and Paralympians Act of 2016, which exempts certain athletes from federal income taxes on the value of their medals and prize money. John and Chris discuss the complex layers of taxation that athletes, especially Olympians, might face, including foreign income taxes and the practicalities of tax planning. They also reflect on their recent experience at the Taxposium in Orlando, highlighting key themes like the importance of technology and continuous education in modern tax practices.

Key Takeaways:

Olympic Prize Money: Olympic athletes receive significant prize money from the USOC – $37,500 for a gold medal, $22,500 for silver, and $15,000 for bronze.
Tax on Medals and Prize Money: Both the monetary winnings and the value of the Olympic medals are considered taxable income. However, under the Olympians and Paralympians Act of 2016, athletes with an adjusted gross income under $1 million ($500,000 if married filing separately) are exempted from federal taxes on these earnings.
Foreign Tax Considerations: Athletes earning income in foreign countries may be subject to those countries' taxes but may receive a foreign tax credit in the US to avoid double taxation.
Ordinary and Necessary Deductions: Olympians, considered self-employed, can deduct ordinary and necessary business expenses related to their athletic training and competitions, such as travel, coaching, and equipment.
Professional Insights: The episode emphasizes the importance of specialized tax knowledge and ongoing education, drawing insights from the recent Taxposium conference attended by the hosts.

Notable Quotes:

"Olympians receive prize money from the USOC for winning medals – $37,500 for gold, $22,500 for silver, and $15,000 for bronze." – Chris
"The value of the Olympic medal is considered taxable income, along with the prize money." – Chris
"Under the Olympians and Paralympians Act of 2016, your medal prize money can be exempt from federal income taxes if your AGI is under a certain threshold." – Chris
"It's really neat to see how much emphasis is being placed on technology and modernizing the profession at these tax conferences." – John
"Ideas are cheap and implementation is valuable; that's why tax planning is so crucial." – Chris

Resources:

Episode Sponsor:
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(00:04) - Olympic Athletes and the Impact of Taxes
(02:44) - Taxposium: The Super Bowl of Tax Conferences
(10:23) - Tax Implications for Olympians and Their Prize Money
(13:16) - Tax Implications for Olympians Winning Medals and Prize Money
(15:41) - Employment Status of Professional Athletes in Team Sports
(17:09) - Tax Planning Strategies for Olympians' Prize Money
(19:16) - Navigating Double Taxation for US Residents Earning Foreign Income
(21:06) - Tax Implications for Olympians as Independent Contractors
(23:12) - Tax Implications and Value of Olympic Medals
(26:41) - Understanding Complex Tax Codes and IRS Efforts

Ep. 94 | Going for Gold: How Olympic Athletes Manage Their Tax Bills

Teaching Tax Flow: The Podcast