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Should that Olympic gold medal be tax deductible?

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What does the IRS have to do with the Olympic games in Rio de Janeiro? Plenty for those athletes fortunate enough to win a medal and the cash bonuses that come with them, which some members of Congress are trying to exempt from federal taxes.

The U.S. Olympic Committee awards bonuses of $25,000 for gold medals, $15,000 for silver medals and $10,000 for bronze medals. Under IRS rules, these payouts are treated as income, and are subject to taxes much like a winner of a big jackpot at a casino or a television game show. The rate of taxation depends on the tax bracket of each medal winner, who is also subject to state taxes.

Some Olympic athletes also receive medal bonuses from the governing bodies of their respective sports. The U.S. Wrestling Foundation, for instance, will award $250,000 to gold medal winners, $50,000 for a silver and $25,000 for a bronze. Others such as USA Swimming Foundation offer financial stipends for top athletes.

Members of Congress including Sen. Chuck Schumer for years have complained about what the New York Democrat has dubbed "the victory tax." Legislation to make these payments free of federal taxes passed the U.S. Senate before stalling in the House of Representatives.

"Most countries subsidize their athletes; the very least we can do is make sure our athletes don't get hit with a tax bill for winning," Schumer said in a statement earlier this month. "We worked hard to pass a bill that would exempt athletes from these tax penalties in the Senate, and now I'm hopeful that this bill will earn strong bipartisan support in the House and quickly become law."

Bill Smith, a managing director at CBIZ MHM, offers a different view, arguing that athletes can already deduct training and other expenses, so it doesn't seem like fair play to allow their medal bonuses to be exempt from federal taxes. As he put it: "If I get a bonus, it's taxable."

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