What a bunch of hogwash!
The medal is not taxable. There is already a specific exemption that excludes the value of the actual medal from being taxable. It is the cash award that is taxable, not the medal. As stated above, there is no reason to exempt the cash award from tax. As to the actual amount of tax, the article assumes the athlete is in the top tax brackets. The cash award is simple added to their other taxable income and will be taxed at whatever tax rate they happen to fall into. For Phelps, ya, it is likely taxed at 35%. I'm not going to feel bad about that, given the millions he makes off endorsements. For lesser known athletes that have much lower income, the tax will be significantly lower - 15% to 25%. Further, to the extent that the athlete personally paid any of their expenses related to their participation in the Olympic, they can claim those expenses as a deduction against their income.
Est. tax Brackets for 2012:
Tax Bracket Married Filing Jointly Single
10% Bracket $0 – $17,400 $0 – $8,700
15% Bracket $17,400 – $70,700 $8,700 – $35,350
25% Bracket $70,700 – $142,700 $35,350 – $85,650
28% Bracket $142,700 – $217,450 $85,650 – $178,650
33% Bracket $217,450 – $388,350 $178,650 – $388,350
35% Bracket Over $388,350 Over $388,350
