For every Michael Phelps, who’s earned an estimated $96 million during his career, there are probably thousands of Olympians who are, relatively speaking, just squeaking by. That’s because Phelps’ cash comes largely from endorsement deals. (Really: $94 million of it.) For Olympians who don’t start out with a trust fund, and don’t go on to win multiple medals, taking home the gold can come with a price tag — or at least, a hefty tax bill.
The U.S. Olympic Committee pays $25,000 for winning a gold medal, $15,000 for a silver, and $10,000 for a bronze. The winnings, if not the hardware itself, are taxable as income. But now, all that is about to change. President Obama recently signed legislation that will make medal winnings tax-free for Olympians who earn less than $1 million a year, starting in 2018.
That means Michael Phelps will still pay taxes on his winnings, but folks without endorsement deals won’t. And that’s a good thing, because for many Olympians, getting to the Games is far from winning the lottery.
Olympian Does Not Equal Millionaire
“Most of these athletes will never sign an endorsement deal or a professional contract, which is why it’s so important that these athletes will no longer be forced to pay a big tax bill when they achieve their Olympic dreams representing the United States,” said Representative Robert Dold (R), who sponsored the bill.
Going for the gold is an expensive process and there are no guarantees, on or off the field. Training and equipment can cost tens of thousands of dollars a year, depending on the sport, and it’s usually impossible to have a full-time job while preparing for the Olympics. Then there’s the potential for lost earnings in the long run.
“When Olympic athletes decide they’re done, and they’re in their late 20s or early 30s, they’re ready to hop into the working world. But their work experience is often little to none,” says Craig Leon, a marathon runner who tried out for the Olympics, in an interview with Wired.
Career changes are tough on anyone, but imagine going from being the best in the world to starting from scratch in a new industry. With all that Olympic athletes give their country, tax-free bonuses for the best of the best seems like a small price to pay in return.
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