By: Jon Schultz, CPA and Brian Nicholson, CPA
Legislative changes around name, image, and likeness (NIL) income for student athletes carry significant tax ramifications for young players as well as the schools they represent. Here’s a primer with important considerations to help schools and NCAA athletes navigate the new paradigm.
NIL Limitations on Schools
While NIL counseling and skills development are among the core guarantees that schools must provide for NCAA athletes, currently, schools cannot directly compensate students for using NIL—nor can an entity associated with the school, such as an alumnae group or aligned athletic supporter organization. Schools may identify and facilitate NIL deals between athletes and students as long as the student has final say over the arrangements and retains the option to have independent representation.
However, it seems like more changes may be on the way. In April 2025, the NCAA board passed proposals that would upend decades of precedent by allowing colleges and universities to pay their athletes per terms of a lawsuit settlement expected to go into effect this summer. The proposals passed were largely expected but still mark a defining day in the history of college sports. An athlete’s ability to be paid directly by his or her school is on track to be enshrined in a rulebook that has forbidden that kind of relationship for decades. For the NCAA rules to officially go into effect, the changes prescribed by the settlement are still pending final approval from a federal judge, with the possibility of further modifications before they are implemented. Stay tuned for further developments on this.
NIL Reporting
Student athletes who earn NIL income should disclose these deals to their school. If they agree to disclose to their school any NIL deals that will generate $600 or more within 30 days, the student becomes eligible for the school’s support in identifying and making NIL agreements with outside organizations. Schools must report anonymized NIL data they receive from students to the NCAA via nilassist.ncaa.org. The same platform provides NIL education for students and helps athletes make deals and connect with service providers.
Self-Employment
NIL sponsorships are typically reported on Form 1099, not W-2, meaning the student is considered a self-employed worker, not an employee of the school or the sponsor. The filing threshold for self-employment income is just $400, so student athletes should plan to file a return even if they haven’t needed to in the past, based on part-time or summer work as an employee.
Athletes may need to make timely quarterly estimated tax payments throughout the year, enough to cover both the employer and employee components of Social Security and Medicare payroll taxes. If the amount of all sponsorship income is more than the standard deduction for the student’s filing status, the quarterly estimated taxes would also need to cover income tax due on that quarter’s payments.
Non-cash Income
NIL income for NCAA athletes can stem from sponsorships, guest appearances, endorsements, social media influencer activities, giveaways, and other arrangements. The rewards can also take many forms, including non-cash compensation like vehicles, sports equipment, merchandise, travel opportunities, etc. Students should remember to include the value of non-cash NIL compensation when paying estimated taxes and filing annual tax returns.
Dependency
Parents often claim students as tax dependents throughout their college years. Significant NIL earnings can raise an athlete’s income above the threshold for dependent status, either in dollars or the share of total support provided. Parents and students should closely monitor total compensation (including non-cash NIL income, taxable scholarships, and earnings from unrelated work) so they can plan appropriately if the student athlete no longer qualifies as a tax dependent.
Financial Aid Eligibility
NIL earnings can boost a student’s total income beyond cutoffs for need-based scholarships and grants, including federal Pell grants and state-based financial aid. In some cases, it may make financial sense to decline a potential NIL opportunity to preserve eligibility for financial aid. NIL income can also potentially mean that students or parents no longer qualify to claim education-focused tax credits.
Deductibility
Athletes who earn 1099 income should be aware of the potential to deduct certain costs, which can lower their tax liability. For example, agent fees, photography, equipment, and unreimbursed travel expenses may qualify as business expenses.
State and Local Taxes
State and local taxes raise total tax liability and can be an important element in tax planning. Depending on contract terms, student athletes may need to file and pay taxes in multiple jurisdictions if they have income from their school, athletic events, appearances, or NIL in different cities and states.
Increased Complexity
It’s an exciting time for NCAA schools and athletes, but sorting out all the ramifications of the new rules can be complicated. Student athletes should seek expert guidance in managing the downstream financial and tax implications of their NIL income. For schools, it’s important to closely monitor evolving rules and work with knowledgeable professionals to ensure tax and regulatory compliance. If you have questions or require assistance navigating the financial and tax aspects of NIL, please reach out to one of our trusted advisors at Mauldin & Jenkins for assistance.
