The consideration of virtual games as an official sport in the Olympics has been a major topic of discussion for many years. During the Tokyo Olympics 2021, which officially concluded on August 8th, a landmark move was made to include virtual games. Virtual (eSports) games made its inaugural debut and took center stage of the Olympic Virtual Series (“OVS”). The series built on the Olympic momentum, bridging the gap between the physical sporting world and the virtual and simulation sports gaming world. Competitors in the OVS were able to compete in five different events, including baseball, cycling, rowing, sailing and motor sport. In order to facilitate these virtual events, the International Olympic Committee (“IOC”) partnered with five international sports federations and gaming publishers, including World Baseball Softball Confederation (“WBSC”), Union Cycliste Internationale (“UCI”), World Rowing, World Sailing and Fédération Internationale de l’Automobile (“FIA”).
The OVS was hosted prior to the Opening Ceremonies, and netted massive worldwide participation and viewership, according to SportTechie.com. While eSports and global gamification are clearly on the path to mainstream athletics, future Olympic gamers should be cognizant of the tax-deduction implications.
The current landscape for eSports/Olympic athletes includes the following tax considerations:
- Many countries pay stipends to their Olympians, which is taxable.
- The U.S. has an international taxation system, which results in athletes, including gamers, being taxed on their worldwide income, including money earned from the Olympics.
- While the IOC awards gold, silver and bronze medals, it does not provide cash prizes in relations to such medals. However, the United States Olympic & Paralympic (“USOPC”) does provide monetary awards ($37,500 for gold; $22,500 for silver; and $15,000 for bronze). It is important to note that the IRS can assign a “victory tax” on the medal earnings, to include the valuation of such medals, for some of our podium perched Americans. It is important to emphasize “some” because, as it relates to Olympic athletes making under $1 million, Former President Obama signed into law the United States Appreciation for Olympians and Paralympians Acts, which excludes Olympic prize money and the value of medals from taxable income.
- Remote working laws have changed across states as a result of the pandemic, which ultimately affects where an athlete has a state-level income tax obligation.
So how does this apply to global gamers? Well, the good news for American Christopher “Your Mom” Powers, who was the first runner-up in the OVS RIO TO TOKYO RACE – Offshore Virtual Sailing event, is that no medals were awarded for this inaugural event. However, this year’s event is likely a precursor for Paris 2024.
If you’re wondering if worldwide taxation laws are already in play for U.S. professional gamers, the answer is yes. Whether a professional or amateur eSport player, all royalties, appearance fees and tournament winnings are considered taxable income. These payments may also incur more than one layer of taxation, depending on the location of the eSports event and a player’s resident. There are always ways to minimize a gamers taxable income, including lodging, expenses and more. In addition, the industry is always evolving – as is evident in this year’s first step toward full-time Olympic inclusion.
We’re Here to Help
The Bennett Thrasher Entertainment accounting team is adept at navigating the cross-border competition complexities to consider for eSports individuals, investors and corporate sponsors. Our expertise enables us to provide creative solutions to help navigate the financial opportunities and taxable responsibilities for participants across the industry spectrum and around the globe. To learn more about our services, contact DiAndria Green by calling 770.396.2200.
