Paul L. Caron
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Monday, August 9, 2021

Olympic Taxes: Katie Ledecky Faces $44,000 U.S. Tax Bill, Katie Nageotte $0

Bloomberg, Ledecky May Owe U.S. $44,000 in Taxes for Olympics Glory:

As the Olympic flame goes out in Tokyo on Sunday, marking the end of the 2020 Games, swimming phenom Katie Ledecky and pole vaulting sensation Katie Nageotte will both be leaving with gold.

A hefty tax bill awaits back in the U.S., but only for one of them.

Ledecky, now the most decorated female swimmer of all time, likely owes the U.S. government about $44,000 from her two gold and two silver medal wins. That estimate is based on her lucrative corporate sponsorships and the prize money attached to her medals.

Nageotte, who won gold in women’s pole vaulting, likely won’t pay any taxes on her winnings, thanks to a special exemption for those with more modest financial success.

Olympic medals don’t have much intrinsic value, fluctuating from up to $700 for a gold to about $5 for a bronze, depending on the market prices of their component metals. But that isn’t the focus of the Internal Revenue Service. Rather, it’s the prize money the United States Olympic & Paralympic Committee awards its medalists. ...

Winnings are treated as income for federal tax purposes, under Section 74 of the Internal Revenue Code. For top-earning athletes like Ledecky, who makes over a million dollars a year in endorsements according to a report in the Washington Post, total prize money is subject to the top-marginal tax rate of 37%.

Nageotte, on the other hand, is spared paying tax by an Obama-era law (H.R.5946) that exempts athletes making less than $1 million in total income after deductions from the so-called “victory tax.”

https://taxprof.typepad.com/taxprof_blog/2021/08/olympic-taxes-katie-ledecky-faces-44000-us-tax-bill-katie-nageotte-0.html

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