Tax Issues Every NIL Athlete Should Know

The world of college athletics has changed dramatically with the rise of Name, Image, and Likeness (NIL) opportunities. For the first time, student-athletes can legitimately profit from endorsements, appearances, and social media partnerships. While these deals open the door to exciting new opportunities, they also bring along something less glamorous, tax obligations.

Many athletes entering NIL arrangements are earning significant income for the first time, and the tax rules can be tricky. Here are the key issues every NIL recipient should understand.

1. You’re Likely Considered Self-Employed

Most NIL income isn’t treated like a paycheck from an employer. Instead, it’s classified as self-employment income. That means you’re responsible not only for regular income tax, but also for self-employment taxes (Social Security and Medicare). Unlike traditional jobs, there’s usually no withholding, so planning ahead is essential.

2. Estimated Taxes Are Required

Because there’s no automatic withholding, most athletes must make quarterly estimated tax payments. Missing these payments can lead to underpayment penalties and a big surprise bill at year-end.

3. Multiple States May Want a Piece

NIL deals often involve appearances, camps, or promotional events in different states. Each state where income is earned may require a separate tax return. High-tax states like California or New York can add a significant layer to your tax bill.

4. Business Expenses Can Be Deducted

The good news is you can often deduct expenses that are “ordinary and necessary” for your NIL activities. These could include:

• Agent or manager fees

• Training and conditioning costs

• Travel for appearances

• Social media or website expenses

Careful record keeping is critical to substantiate these deductions if the IRS ever asks questions.

5. Free Gear and Perks Are Still Taxable

Many NIL arrangements provide non-cash compensation, like clothing, sports equipment, cars, or even free housing. The IRS requires you to report the fair market value of these perks as taxable income—even if no cash changes hands.

6. Scholarships and Aid May Be Impacted

While NIL income typically won’t reduce your athletic scholarship, it can affect eligibility for need-based financial aid. Families should keep this in mind when evaluating offers.

7. Should You Form an LLC?

Some athletes create an LLC or S-Corporation to handle NIL income. In certain cases, this can provide liability protection or tax savings, but it also comes with extra compliance and costs. The right structure depends on your income level, state of residence, and long-term plans.

8. Watch for Gifts and Booster Payments

If boosters or family friends provide “support” outside of a legitimate NIL contract, the IRS may treat it as taxable income (or in some cases, a gift). How it’s classified matters for both you and the person providing the funds.

9. International Athletes Face Extra Complexity

For non-U.S. athletes, NIL deals may involve visa restrictions, U.S. withholding taxes, and international tax treaties. These issues require special attention to avoid jeopardizing visa status or overpaying taxes.

10. Don’t Forget the Audit Risk

Because NIL is new and many athletes are first-time taxpayers, the IRS may keep a close eye on reporting. Inconsistent or incomplete filings can easily trigger an audit.

The Bottom Line

NIL income offers incredible opportunities, but with new income comes new responsibilities. Planning ahead for taxes is just as important as training for the next game. Working with an experienced tax advisor can help you avoid surprises, maximize deductions, and stay compliant.

For questions regarding this blog post or any other legal or tax related matter, please feel free to contact me at jcrouch@meadowscollier.com.