As we watch U.S. Olympians competing in what, for many, is the fruition of a lifetime of effort and focus, it's sobering to remember that the IRS is watching too. The medals these athletes win as they represent the U.S. will be taxed as income under current law.
According to U.S. tax law, Olympians must add the value of their medals to their taxable income and are therefore liable for a tax of up to 35% on medals they receive from competing.
The shrewdness of such a tax is best understood in light of the monetary prizes that go along with Olympic medals. Gold medal recepients receive $25,000 with their medal, Silver recepients get $15,000, and Bronze gets $10,000.
The bottom line: when an Olympian wins, he or she automatically owes money to the U.S. government.