NIL income is taxable business income. Learn what tax responsibilities college student-athletes face and how they and their families can prepare.
What is NIL?
NIL (Name, Image, and Likeness) is a landmark NCAA policy. In 2021, the NCAA approved the first version of the policy, officially allowing college student-athletes to monetize their personal brands.
When the NCAA opened that door, athletes becoming business owners may not have been top of mind for NCAA officials, but it is a primary focus of the IRS and other taxing authorities.
How Do Taxing Authorities View NIL Income?
In the eyes of the IRS and other taxing authorities, NIL income = taxable business income. The IRS is clear: All NIL income is taxable, including direct payments from brands and non-cash compensation such as gear, travel, and gift cards received in exchange for NIL activity.
How Do Student-Athletes with NIL Deals Make Money?
Student-athletes earn money through NIL in different ways, and each of these revenue sources has its own tax implications:
- Social media influence
- Brand partnerships/endorsements
- Autograph signings
- Camps and clinics
- Merchandise and licensing
- Gear, travel, and other non-cash perks
- NIL collective payments/revenue sharing
What is Revenue Sharing?
Revenue sharing is a model in which universities share a portion of athletic revenue directly with athletes. It is funded by the university through ticket sales, media rights, sponsorships, and other revenue sources, and it is paid to the student-athlete directly by the school.
For athletes and families, revenue sharing creates a second layer of planning beyond traditional NIL deals. While revenue-sharing payments come from the school rather than a third-party brand, athletes and their parents still need to understand how the payments are classified, whether taxes are withheld, and how the income affects estimated tax payments, state filings, and financial aid considerations.
For universities, revenue sharing increases the need for coordinated education among athletics, compliance, finance, and tax professionals. Schools may not be responsible for preparing an athlete’s tax return, but they can help reduce confusion by explaining payment timing, documentation, reporting expectations, and the distinction between school-paid revenue sharing and outside NIL compensation.
For brands and collectives, the new NIL environment raises the bar for clear contracts, proper reporting, and realistic expectations.
What Tax Responsibilities Do Athletes with NIL Deals Have?
College student-athletes earning money from NIL deals are effectively becoming business owners, which comes with tax responsibilities. Most are not employees of the organizations that use their NILs; they are independent contractors, which means they are self employed. As such, they are seen by the IRS as small-business owners with distinct responsibilities:
- They receive 1099‑NEC forms, not W‑2s
- They must file a Schedule C as a business
- They owe self‑employment tax (15.3%) on top of income tax
- They must track revenue and expenses
In addition to federal income tax, state taxes may also apply to NIL earnings and could be owed in the athlete’s home state, the states in which the athlete earned the NIL income, and the state where the athlete’s school is located.
In short, a 19‑year‑old college quarterback with an NIL deal now has similar tax obligations to any small‑business owner.
What Should Athletes with NIL Deals Do to Prepare?
Student-athletes with NIL income and their parents should address six areas to manage the athletes’ tax obligations and protect their financial future:
Goal 1: Think like a business owner.
A business owner must manage
-
- Quarterly estimated taxes
- Contracts
- Brand strategy and audience growth
- Recordkeeping and compliance
- Multi‑state tax exposure
- Expenses for tax deductions
These responsibilities arrive quickly, often with no financial training. Many athletes and their families don’t realize that failing to plan for taxes with the help of trained professionals can turn a lucrative NIL year into a financial crisis.
Goal 2: Document income and non-cash compensation carefully.
Athletes and their parents should work with financial professionals to understand what the athletes are being paid for, what documentation they will receive, and whether non-cash benefits—such as merchandise, travel, or gift cards—may also create taxable income.
Goal 3: Consider the business structure.
With guidance from tax advisors, some athletes form limited liability companies (LLCs) or S corporations to manage income, reduce liability, and optimize taxes, mirroring the structures used by other sports professionals and entertainers.
Goal 4: Understand how NIL can affect scholarships.
While some aspects of scholarships, including tuition, fees, and required supplies, usually remain tax free, some elements, such as housing and stipends, could become taxable income if bundled as perks in an NIL deal. Student-athletes should ensure scholarships are carefully monitored by their tax team.
Goal 5: Build a tax and financial advisory team.
Athletes already understand the value of having the right people around them—coaches, trainers, agents, and nutritionists. The same idea applies to taxes and finances. Student-athletes seeking NIL deals and their families should build a knowledgeable and reputable team of financial experts before the first NIL contract is signed.
A strong team to support the student-athlete with an NIL deal may include
-
- A tax professional
- A financial planner
- A wealth manager
Goal 6: Plan early: The IRS always gets paid.
NIL created much more than earning potential; it also created responsibility. Student-athletes are now business owners. Those who prepare for this reality early by enlisting the help of parents/families and partnering with tax experts will protect their earnings, build sustainable brands, and position themselves for long-term success. Those who don’t may learn the hard way that the IRS always gets paid.
How Can Universities, Brands, and Families Help?
NIL isn’t just about money; it’s also about financial literacy, compliance, and long-term stability. Each stakeholder group has a distinct role in supporting NIL athletes:
- Universities must support athletes with financial education, not just opportunity
- Brands must treat athletes as business partners, not students
- Families must understand the tax and legal landscape and help the athlete seek advice
The IRS isn’t waiting for athletes to catch up. The rules are already in place.
Key Takeaways
- NIL and revenue-sharing income can create real tax obligations, even when athletes are still full-time students.
- Athletes and parents should track payments, contracts, business expenses, and non-cash compensation from the beginning.
- Quarterly estimated taxes, self-employment tax, and multi-state filings can surprise athletes who do not plan ahead.
- Universities, brands, and families all play a role in helping athletes treat NIL as a business, not just an earning opportunity.
How PYA Can Help Student-Athletes Prepare
PYA’s Tax experts help student-athletes and their families with the complex demands of NIL income, including managing quarterly estimated taxes, self-employment tax, and multi-state tax filings, while strategizing to achieve future financial sustainability. To get started, contact our Tax Concierge at TaxConcierge@pyapc.com. And learn about PYA’s services for high-net-worth individuals.
This article is for general informational purposes only and should not be treated as tax, legal, or financial advice. Student-athletes and their families should consult qualified tax and legal professionals before making decisions related to NIL income, revenue-sharing payments, entity formation, or filing obligations.
