Tax Implications When NCAA Student Athletes Make Money
Now that college athletes can profit from their name, image and likeness (NIL), they should know those deals for limo rides, free gear and endorsements can come with some strings attached.


This is the first academic year that NCAA student-athletes have been able to earn money for their accomplishments and popularity. The governing body created “name, image and likeness” guidelines in July 2021 from which participants can profit in various ways.
This April, there was another first-time occurrence for student-athletes with NIL deals: paying taxes. Filings were due April 18, which required many student athletes to submit IRS forms for the first time in their lives, while others experienced a different aspect of the process.
Here are some of the hurdles those with NIL income are now faced with.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What Can Be Taxed?
NIL deals have earned student-athletes a variety of endorsement and promotional deals. These offers come with various forms of payment. All that can be taxed.
Traditional compensation is easier to handle. However, when it comes to receiving free products, car usage, paid trips, payment with cryptocurrency, or other goods and services as compensation, that can make things tricky. All those forms of compensation are subject to tax.
Those with NIL deals or any sponsorships are considered self-employed by the government. Anyone who makes $600 in income, be it cash or the value of received items or services, will be subject to taxation under the self-employed Internal Revenue Service guidelines.
Different Tax Forms
Some student-athletes may be familiar with W-2 forms. This is how most traditional workers handle their taxes. Have a work-study job or work at a summer camp? That usually means automatic deductions every pay period and the W-2 form for tax returns the next year.
Self-employment comes with two major differences: First, these deals do not have money taken out automatically before payout. The recipient is responsible for paying any taxes independently. This also means a different form comes in the mail at tax time.
There are variations of the 1099 form that self-employed taxpayers will receive. The 1099-NEC comes with direct payment, while a 1099-K arrives when paid through a third party, such as PayPal. For products and services received, like trips or merchandise, that brings a 1099-Misc form.
All forms received must be submitted with a tax return to determine the amount owed. This is going to require you to file a business tax return, in addition to a personal form, with the extra forms needed with self-employment taxes.
Athletes in 41 of the 50 states will also be subject to state taxes if income crosses a threshold. It can add up, especially if you live in a high-tax state: A Sportico article found a shooting guard at UCLA with $100,000 in NIL income will have to pay over $5,000 more in taxes than a running back making that same amount going to Florida State. NIL income taxes must be paid out with state filings, which costs even more money.
Estimated Tax
On top of the usual federal and state income taxes, those who are self-employed must pay self-employment taxes. The tax rate for Social Security and Medicare on reported self-employment is 15.3% (self-employment taxes can be reduced through the use of a S-Corp vs. LLC). For those projected to pay, it’s recommended to pay at least $1,000 in quarterly estimated taxes to avoid a large bill in April. If paid yearly instead of quarterly, TurboTax outlines ways to avoid underpayment penalties.
In order to avoid penalties for paying too little or too late, one can either pay 90% of this year’s current estimated tax bill, or aim for the full amount of last year’s tax. If an individual is making more in the current year than in the former, it is recommended to pay 100% of the current year’s estimated bill.
The first option can be applied if it is expected that this year’s income will be less than the previous year, but underpayment penalties can still be incurred if payment adds up to less than 90%. It is typically safer to choose the second option and pay 100% of the previous taxes. This way, estimated tax penalties can be avoided no matter how much is owed on the tax return.
Keep Those Receipts
While the amounts owed and the right time to pay them can seem like a lot to swallow, the good thing is there are ways to shrink that amount. Welcome to the wonderful world of deductions.
Any expenses that are associated with making money from NIL deals can count against the income and lower the tax burden:
- If a company flies a student-athlete into a city for an appearance, but doesn’t pay for hotel or car rentals, those costs can be deducted.
- The same goes for new cameras, computers or consultants used for social media campaigns.
- Fees to websites, marketing agencies and lawyers to put together deals can all go against the income.
Make sure these amounts are known and can be backed up with receipts or card statements. If the expenses reduce the amount of income earned to under $400, there is no tax payment required.
Those earning income from NIL deals no longer qualify as dependents on parents’ or guardians’ returns. However, this means student-athletes can claim the American Opportunity Tax Credit, which can be up to $2,500. Also, any student loan interest can be deducted, up to $2,500. State filings may also provide additional opportunities to claim deductions and lower tax bills.
These deductions will lower the amount subject to the existing tax rates. They do not directly count against the amount owed.
Be aware that NIL income also carries FAFSA implications, meaning student-athletes may receive less need-based financial aid. Keep this in mind when filling out those forms, which are usually due in February before the new school year starts.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Ron L. Brown, CFP, is the co-founder of Athlete Essentials and president of R.L. Brown Wealth Management. He is an expert in wealth management, retirement planning, tax and estate planning, and business management. Ron takes pride in his work to support clients in reaching their individual financial goals. He graduated from Asbury University in 2003 and earned his CFP, Certified Financial Planner, credential in 2017. Learn more at athessentials.com and rlbrownwealth.com.
-
Stocks Edge Higher With Nvidia, Fed in Focus: Stock Market Today
The AI bellwether reports earnings after today's close, while Wall Street is keeping a cautious eye on President Trump's attacks against the Fed.
-
New Trump Tax Bill: Five Changes Homeowners Need to Know Now
Tax Changes Trump’s new tax legislation is reshaping how tax breaks for homeowners work.
-
I'm a Financial Planning Pro: Do Your Family a Final Favor and Write Them a Love Letter
Specify your preferences in this personal document that shares your wishes on how you want to be remembered and celebrated. Your family will thank you for easing an emotional time.
-
The Future of Financial Advice Is Human: Gen Z Trusts Advisers, But AI Skills Matter
Graduates entering the workforce trust human advisers more than AI tools with their financial planning. But AI can still enhance the client/adviser relationship.
-
Will You Get a ‘Surprise’ Tax Bill on Your Social Security Benefits in Retirement?
Retirement Taxes Social Security benefit payments might land you in hot water when filing 2025 taxes — here are three reasons why.
-
I'm a Wealth Adviser: If You're a DIY Investor, Don't Make These Five Mistakes
Even though you may feel confident because of easy access to investing information, you may be making mistakes that could compromise your long-term performance. Here's what you should know.
-
Building a Business That Lasts: The Critical Steps to Avoid Blunders
'Another Way' author David Whorton offers advice on how to build an 'evergreen' business that endures by avoiding common pitfalls that can lead to failure.
-
I'm a Financial Pro: Why You Shouldn't Put All Your Eggs in the Company Stock Basket
Limit exposure to your employer's stock, sell it periodically and maintain portfolio diversification to protect your wealth from unexpected events.
-
How Will the One Big Beautiful Bill Shape Your Legacy?
The One Big Beautiful Bill Act removes uncertainty over tax brackets and estate tax. Families should take time to review estate plans to take full advantage.
-
Should You Claim Social Security Early or Late? A Financial Adviser Weighs In
There isn't a wrong age to start claiming Social Security, but there are factors that everyone should consider to avoid leaving money on the table.