For many U.S. athletes, medals or prizes awarded during the Olympic and Paralympic games are tax-exempt. That hasn’t always been the case.
The opening ceremony of the 2024 Paris Summer Olympics is set, and the parade marking the event will be far from traditional. Over 10,000 Olympic athletes will cruise on more than 90 boats through Seine River, passing by the Notre Dame, the Louvre, and the Eiffel Tower. No matter where the athletes come from—or how they arrive—they are all aiming for the same prize: Olympic gold.
The U.S. team has high expectations. From Simone Biles to Suni Lee, and Breanna Stewart to Diana Taurasi, American athletes expect to bring home some serious bling.
Fortunately for many athletes, medals or prizes awarded during the Olympic and Paralympic games are tax-exempt.
That hasn’t always been the case. After a few previous fails, The United States Appreciation for Olympians and Paralympians Act successfully made it through Congress in September 2016. That year, President Obama made it official by signing it into law (it was retroactive, so it was applied to the 2016 games).
Prior to the 2016 law, all Olympic medals and related prizes earned by U.S. taxpayers, including bonuses, were taxed as income for federal purposes. It made no difference where the Olympics were located since all prize money, bonus money, and endorsements are subject to tax in the U.S., even if they were earned thousands of miles away.Tax On Worldwide Income
The last bit hasn’t changed. It doesn’t matter where you live, or where you earn your money—even at the Olympics. If you are a U.S. citizen or resident alien, you are subject to tax on your worldwide income. As a result, you must report all taxable income—even if your income is also reportable and taxable in another country.
Some taxpayers who get paid for services provided in another country may benefit from tax treaty treatment. That happens when another country—like France—agrees with the U.S. about the tax treatment of certain kinds of income. Typically, the treaty specifically provides that income earned in one country should only be taxed one time.
If there is no tax treaty treatment that applies, taxpayers may qualify for other tax benefits. For example, Americans who live abroad (as many athletes choose to do for training or work) may claim the foreign earned income exclusion–an exclusion of your foreign earnings up to an amount that is adjusted annually for inflation ($126,500 for the 2024 tax year)—and the foreign tax credit—a credit for foreign taxes imposed on you by a foreign country or U.S. possession so that you aren’t taxed twice on the same income.
