Olympians Could Owe The IRS Thousands In Taxes On Medals, Cash Bonuses

Even an Olympic victory comes with a price. In this case, it's the taxes America's victorious athletes can expect to pay when they return from the games.

Medals and prize money are both subject to income tax, according to the Americans for Tax Reform.

“It’s no different from winning Wheel of Fortune or the lottery," Alex Knight, a tax partner at Atlanta’s Habif, Arogeti & Wynne, told Reuters.

A gold medal, which is worth $650, according to CNN, could cost athletes about $236 in taxes. While a bronze metal, which is worth $5, could only cost an athlete $2 in taxes

The real bite, however, will be taxes taken out of Olympians' cash bonuses.

The U.S. Olympic Organizing Committee will award London champions $25,000 for a gold medal, $15,000 for silver and $10,000 for bringing home a bronze, Reuters reports.

At a 35 percent income tax rate, bronze medalists will owe the IRS a total of $3,500, silver medalists will owe $5,250 and top finishers will be liable for $$8,750, according to Americans for Tax Reform.

Of course, many high-profile athletes will also come home to lucrative sponsorships offers, also all taxable.

In 2008, Michael Phelps earned a $1 million bonus from Speedo, which he donated to charity, NBC News reports. This summer, Phelps' teammate Ryan Lochte could earn even more from ads for Gatorade, Gillette and others.

But American athletes aren't the only Olympians vying for the gold -- or big prize money.

Though Malaysia has never won a gold medal in an Olympic Games, Andrew Kam, the owner of a gold mine and the Kuala Lumpur Racket Club, will award a 12.5 kilogram (27.5 pound) gold bar (market worth $630,000) to any badminton player who earns the top spot.

A recent Yahoo! Finance story also notes that during the 2010 Winter Olympics, Russians received $135,000 for gold medals and $54,000 for bronze.

There had been controversy leading up to London Games regarding Britain's stringent tax laws, which ordinarily take a large cut of the global income of any international athlete competing on its soil. The policy has led some athletes, including golfer Sergio “El Nino” Garcia and tennis star Rafael Nadal, to abstain from competing in British tournaments.

Worried the policy would discourage participation from Olympic superstars like sprinter Usain Bolt, who has previously criticized the law, British taxing authorities agreed to an exemption for London 2012 Olympic athletes.

Correction: A previous version of this article incorrectly stated how much medal winners could be taxed on their prize money. At a 35 percent income tax rate, bronze medalists would owe the IRS $3,500, silver medalists would owe $5,250 and gold medalists would owe $8,750.

UPDATE: Senator Marco Rubio (R- Fla.) introduced a bill to Congress on Wednesday that would exempt Olympic winners from taxes on prizes received at the London games.