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Author Topic: Prize Money - Are they taxable?  (Read 5453 times)
CREALMADRID
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« on: October 10, 2012, 10:47:37 PM »

Can someone explain me this, i pic this chart from wikipedia : http://en.wikipedia.org/wiki/Internal_Revenue_Code

so does this mean that PHIL`s OLYMPIA check of 250k is 43% taxes-then he earns "only" 147,5 k cause he has to pay 107,5k taxes... i dont understand which is real income the numbers from the left or from the right:


* tax usa.jpg (167.06 KB, 426x622 - viewed 993 times.)
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BB
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« Reply #1 on: October 10, 2012, 10:59:25 PM »

No that's an old code adjusted for inflation.

Here's what you need -

Here’s a quick rundown of what the Federal income tax brackets are expected to look like in 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

.
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Mattyh7688
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« Reply #2 on: October 10, 2012, 11:06:23 PM »

I bet a lot of guys don't pay taxes.. Phil probably is smart though and does.
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CREALMADRID
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« Reply #3 on: October 10, 2012, 11:16:29 PM »

No that's an old code adjusted for inflation.

Here's what you need -

Here’s a quick rundown of what the Federal income tax brackets are expected to look like in 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

.
so for the olympia winner you pay 1/3 of your 250k...interesting
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bigmikecox
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« Reply #4 on: October 11, 2012, 06:48:34 AM »

I bet a lot of guys don't pay taxes.. Phil probably is smart though and does.

If they get cash to guest pose, why would they
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mass243
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« Reply #5 on: October 11, 2012, 06:50:45 AM »


I doubt if it's 30 %.

He lives in USA and USA is not communistic. Right ?
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POB
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« Reply #6 on: October 11, 2012, 12:36:30 PM »

so for the olympia winner you pay 1/3 of your 250k...interesting

Easily that depending on right offs maybe more
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POB
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« Reply #7 on: October 11, 2012, 12:38:20 PM »

If they get cash to guest pose, why would they

I'm sure all guest pose cash,pictures he sells,and appearance cash goes unclaimed, I don't see how you could get around paying tax on contest checks though.

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POB
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« Reply #8 on: October 11, 2012, 12:39:07 PM »

All personal training cash goes right in the pocket to.
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Metabolic
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« Reply #9 on: October 11, 2012, 02:17:32 PM »

I doubt if it's 30 %.

He lives in USA and USA is not communistic. Right ?

 Grin

That sort of money would pay taxes here, and its sad to think of all the effort and investment to actually win and then get up to 40% off...
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CREALMADRID
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« Reply #10 on: October 11, 2012, 02:46:47 PM »

All personal training cash goes right in the pocket to.
I think the same-but for example when he collects all this money aside and put it in the bank or wherever...then he wants to buy a car or a new house,do the goverment see theres a difference what he earns and what he bought...in one or another way he has to launder his money
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Wisc1983
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« Reply #11 on: October 11, 2012, 04:33:49 PM »

he should just ask for a dump truck fill of GH
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jwb
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« Reply #12 on: October 11, 2012, 04:43:55 PM »

USA tax rates are low.
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a_ahmed
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« Reply #13 on: October 11, 2012, 04:53:49 PM »

USA tax rates are low.

I am being raped up in Canada with taxes. Apparently what little money I make is equivalent more than what Phil is making in terms of paying taxes lol.

Arab countries have no taxes, the olympia prize should be handed out in like Kuwait or Qatar or sometihng haha...
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Mate
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« Reply #14 on: October 11, 2012, 08:59:53 PM »

Aren't winnings from athletic events or other "shows" non-taxable or something like that? I also think that athletes can have certain expenses deducted (food, travel, etc) from taxable winnings too.
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Heywood
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« Reply #15 on: October 11, 2012, 09:14:29 PM »

If that were Phil's only income, and no deductions or credits, the tax would be about $64,000, after standard deduction and personal exemption.
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Ron
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« Reply #16 on: October 11, 2012, 09:18:14 PM »

Tax rates in the US vary (between state income tax and federal income tax).  With $250,000 in prize money, he will pay $36-39% in federal income tax, and whatever Colorado state income tax (6% or so).  So yes, around 44% or so.

However, that is the INCOME generated for his business - Phil Heath Inc.    

There are expenses associated with the business, deductions and much more.   He will pay taxes on whatever is left at the end of the year.

Total income - expenses, etc.


Quote
I think the same-but for example when he collects all this money aside and put it in the bank or wherever...then he wants to buy a car or a new house, do the government see theres a difference what he earns and what he bought

His car (and only ONE car) is an expense, as is the food he buys, and anything that goes into preparation for his physique, which is associated with his winnings.  It is the same as any other sport competitor, actor or any other self employed businessman.  The rules apply no different. 

For a house, if you have an office in the house, you can apply the amount of sq footage of the office in the house (aka, 10% or 15%) and apply those expense. If you pay $2,000 a month rent, and the office and workspace is 15% of the house, $300 of it goes for expenses, same with utilities, etc. 

They are many rules, but that is why there are accountants and so much more. Each type of business is different.


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Heywood
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« Reply #17 on: October 11, 2012, 09:28:46 PM »

It's prize money, so if it were me, I'd ask that the check and the documentation from the IFBB do in fact show it as prize money.

If you want to call it business income, then you've just added self-employment tax (SSI & Medicare) to the equation, and you'll file Schedules C & SE.  You'll need a lot of expenses to make that wash on $250,000.

Call it business income and add $20,000 of expenses for food supps, home office/gym, and you have about $71,000 tax bill, because I've added SE tax (54 regular + 17 SE).

You'd have to research it to see whether you have a choice in the matter.

Ron, you cannot take a deduction for "rent" because you cannot pay yourself rent unless you are operating out of a corp entity.  And even if you did, you have to recognize that as income anyway on Sch E.  So you save a little SE tax on the differnce.

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CREALMADRID
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« Reply #18 on: October 11, 2012, 11:16:57 PM »

Tax rates in the US vary (between state income tax and federal income tax).  With $250,000 in prize money, he will pay $36-39% in federal income tax, and whatever Colorado state income tax (6% or so).  So yes, around 44% or so.

However, that is the INCOME generated for his business - Phil Heath Inc.    

There are expenses associated with the business, deductions and much more.   He will pay taxes on whatever is left at the end of the year.

Total income - expenses, etc.


His car (and only ONE car) is an expense, as is the food he buys, and anything that goes into preparation for his physique, which is associated with his winnings.  It is the same as any other sport competitor, actor or any other self employed businessman.  The rules apply no different. 

For a house, if you have an office in the house, you can apply the amount of sq footage of the office in the house (aka, 10% or 15%) and apply those expense. If you pay $2,000 a month rent, and the office and workspace is 15% of the house, $300 of it goes for expenses, same with utilities, etc. 

They are many rules, but that is why there are accountants and so much more. Each type of business is different.



OK lets see-he earned from O and SHERU 310k,lets say he have 250 k from MUSCLETECH and 250 from FLEX-thats 810k,lets say taxes are 40%,in the end he earns 486k...i know that he have many other sponsors but i wrote the basics...so he earn from selling pics online and on the expoes,guest posings etc...he can easily "wash" that money-cause he buy all quality food,goes to restaurants to eat(thats not cheap if you go year round),he goes to massages and chiropractic adjustments,he buy gas for the car,clothes,house expens...basicly he lives a high life and for that he can wash the money...but if he is going for example to buy a car or a big house they would see that something is wrong with his taxes...am curious how much he jay and other top ifbb makes...i heard ronnie said that he charges 7k for seminar and guest posing...
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« Reply #19 on: October 12, 2012, 12:41:05 AM »

Imagine paying 100 thousand in taxes *snap* just like that and then not even receiving basic health care without paying extra.
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BigCyp
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« Reply #20 on: October 12, 2012, 12:43:27 AM »

I'm not sure about prize money, but I do know that we have a paedophile on the boards called 'garebear' who is avoiding serious allegations.
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The Abdominal Snoman
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« Reply #21 on: October 12, 2012, 08:06:13 AM »

Would be amazing if he was allowed to deduct ALL his food. Because all human beings need a min/amount of food to eat just to stay alive obviously. True Adonis should write to the IRS about this and if food is a deductible, maybe they would reconsider after reading his calorie is a calorie theory and that no special food is needed for hypertrophy.
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El Diablo Blanco
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« Reply #22 on: October 12, 2012, 08:09:22 AM »

Mr. Olympia don't pay no fucking taxes
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POB
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« Reply #23 on: October 12, 2012, 08:36:37 AM »

Tax rates in the US vary (between state income tax and federal income tax).  With $250,000 in prize money, he will pay $36-39% in federal income tax, and whatever Colorado state income tax (6% or so).  So yes, around 44% or so.

However, that is the INCOME generated for his business - Phil Heath Inc.    

There are expenses associated with the business, deductions and much more.   He will pay taxes on whatever is left at the end of the year.

Total income - expenses, etc.


His car (and only ONE car) is an expense, as is the food he buys, and anything that goes into preparation for his physique, which is associated with his winnings.  It is the same as any other sport competitor, actor or any other self employed businessman.  The rules apply no different. 

For a house, if you have an office in the house, you can apply the amount of sq footage of the office in the house (aka, 10% or 15%) and apply those expense. If you pay $2,000 a month rent, and the office and workspace is 15% of the house, $300 of it goes for expenses, same with utilities, etc. 

They are many rules, but that is why there are accountants and so much more. Each type of business is different.




Can he write off his scripts?

I know to write off medical it usually has to be more than 10% of your income
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Heywood
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« Reply #24 on: October 12, 2012, 09:35:04 AM »

Presciption medicine is deductible to the extent the total of all medical expenses exceed 7.5% of your adjusted gross income.  (Includes heath insurance, etc).

However, it looks like prize winnings for a professional athlete is subject to SE tax.  That adds another 13% to the effective tax rate (you get to deduct 50% of the SE tax).

So, you may also deduct your health insurance as an adjustment for AGI.

Illegal drugs - not deductible.
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