🏆 NIL Income and Taxes: What College Athletes Need to Know

When college athletes sign endorsement deals, appear in ads, or get paid for their name, image, and likeness (NIL), they’re not just entering a new playing field — they’re stepping into the world of taxable income.

Since 2021, NIL rights have allowed student-athletes to earn money from sponsorships, social media, appearances, and collectives. But what many don’t realize is that the IRS and state tax agencies treat NIL income just like business income — and that means it’s taxable.

If you’re a college athlete, coach, or parent helping an athlete manage their finances, here’s what you need to know before tax season.

NIL Income Is Taxable — Even for College Students

Under federal tax law, any money or goods received in exchange for services or promotion counts as taxable income. That includes:

• Cash payments from collectives or sponsors

• Free products, clothing, or equipment used in marketing deals

• Appearances, signings, or social media promotions

• Royalties from licensed merchandise

• Payments made through third parties (e.g., NIL collectives or boosters)

  
  

Even if no cash changes hands — for example, if you receive a free car or travel perks — those non-cash benefits must still be reported at fair market value as income.

How NIL Income Is Reported

Most NIL deals are structured as independent contractor income, not wages from an employer.

That means you’ll likely receive a Form 1099-NEC (for Non-Employee Compensation) instead of a W-2. The key difference:

• No taxes are withheld from your NIL payments

• You’re responsible for paying income and self-employment taxes yourself

  
  

In other words, if you earned $25,000 from NIL activities, you may owe roughly 15.3% in self-employment tax plus federal and possibly state income taxes — even if you’re still a student.

Estimated Taxes and Recordkeeping

Because taxes aren’t withheld automatically, college athletes need to make quarterly estimated tax payments throughout the year. Missing these can lead to penalties and interest.

To stay compliant:

✅ Track your NIL payments and any related expenses

✅ Set aside at least 25–30% of your income for taxes

✅ Make quarterly estimated payments (April, June, September, and January)

✅ Keep receipts for deductible expenses like:

• Travel for events

• Marketing costs

• Agent or manager fees

• Equipment and supplies

• Legal or accounting services

  
  

Good bookkeeping isn’t optional — it’s the key to saving money at tax time.

Recent IRS Guidance on NIL Income

In 2024 and 2025, the IRS and several state tax agencies issued clarifications around NIL taxation, focusing on collectives and charitable organizations.

Some collectives tried to structure payments through nonprofit entities, claiming the transactions were “charitable.” The IRS has now made it clear:

This means NIL deals connected to nonprofit collectives are not tax-free, and those organizations may lose their charitable status if they primarily fund athlete payments.

The bottom line: NIL income, regardless of who pays it, is considered earned income and must be reported.

How States Treat NIL Income

Federal rules apply everywhere, but state tax laws vary:

• California, New York, and Illinois aggressively tax NIL income earned by in-state residents or for activities performed there.

• Texas, Florida, and Tennessee — no state income tax, which can significantly reduce the total tax burden for athletes based there.

• North Carolina and Georgia have proposed simplified filing rules for student-athletes but still treat NIL as taxable income.

  
  

Athletes who attend college in one state but perform NIL activities in another may need to file multiple state tax returns — just like professional players under the jock tax system.

Common Mistakes Athletes Make

❌ Assuming NIL money isn’t taxable because you’re still in school

❌ Spending all your NIL income without setting aside funds for taxes

❌ Forgetting to track or deduct legitimate business expenses

❌ Ignoring self-employment taxes (15.3%)

❌ Missing estimated tax deadlines

The Takeaway

Earning NIL income is exciting — but it comes with new responsibilities. Treating your NIL activity like a small business can help you stay compliant, protect your financial future, and avoid costly surprises.

A good rule of thumb: If you get paid or receive something of value, assume it’s taxable. Keep records, plan ahead, and get professional help early.

At Turner Business Solutions, we work with athletes, families, and advisors to navigate NIL income, self-employment taxes, and multi-state compliance.

➡️ Contact us today to learn how to manage your NIL income and keep your finances on track.

Up Next:👉 Part 3 of our “Taxes in the World of Sports” series: “State Spotlight — How Different States Tax Athletes and NIL Income.”