(Reuters) - When U.S. athletes at the London Olympic Games bow their heads to receive a medal, one would hope they are not thinking about their taxes. But as with much in life, Olympic glory has a price -- a tax price, that is.
Legislation to exempt U.S. Olympic athletes from having to pay tax on prize money won at the games was proposed on Wednesday in the U.S. Congress by Senator Marco Rubio.
Podium athletes get checks - $25,000 for gold, $15,000 for silver and $10,000 for bronze - and the winnings are taxable for Americans.
“It’s no different from winning ‘Wheel of Fortune’ or the lottery,” said Alex Knight, a tax partner at the Atlanta accounting firm of Habif, Arogeti & Wynne.
The Florida Republican said, “Athletes representing our nation overseas in the Olympics shouldn’t have to worry about an extra tax bill” when they get back home.
How much a U.S. taxpaying athlete would owe would vary widely depending on overall income, age and tax status. It could be as much as 35 percent for, say, basketball players who are already in the top tax bracket; for many athletes it would be less.
On first glance, a tax break for American Olympians seems like a good idea, but some tax experts said it was just the sort of well-intentioned proposal that had made the U.S. tax code into what Rubio himself called “a complicated and burdensome mess.”
The U.S. tax code has not been thoroughly overhauled since 1986 and is riddled with special tax breaks. Both Democrats and Republicans, in principle, favor revising the code by getting rid of tax breaks so tax rates can be lowered.
“I have sympathy for Olympic athletes,” who practice for many years often without pay for a shot at the games, said Norman Ornstein, a resident scholar at the American Enterprise Institute, a conservative think tank in Washington, D.C.
“But the athletic associations that put up these bonuses for medal winners should put up enough money to cover the taxes too. If it’s a $25,000 award, add in a third of that so that it’s $25,000 after taxes,” he said.
Addressing the problem by adding a tax break for Olympic athletes would only further complicate the code, he said.
Matthew Gardner, an analyst at Citizens for Tax Justice, a left-leaning think tank, said:
“The main reason why our tax system is so complicated is that Congress keeps deciding that certain types of income are special, and should get special tax breaks.”
Even Olympic medals themselves could be seen as valuable gifts and taxable by the U.S. government, Knight said.
Taking into account precious metal market prices, tax on a gold medal could be upwards of $200.
Still, Knight said, the Internal Revenue Service probably will not be chasing after athletes for tax revenue. “I have to imagine that would be a public relations nightmare,” he said.
Reporting by Nanette Byrnes and Kevin Drawbaugh; Editing by Cynthia Osterman