Taxes
Money a college athlete earns from NIL deals or revenue sharing is taxable income. The IRS has been explicit about this. Most NIL income is treated as self-employment income, which means the athlete owes income tax plus self-employment tax, and is generally responsible for making quarterly estimated payments rather than having tax withheld. This page is a general overview to help athletes and families understand what’s involved. It is not tax advice, and specific numbers here are illustrative rather than a substitute for a tax professional.
Why This Income Is Taxable
The IRS treats NIL and revenue-sharing payments the same way it treats any other income earned through personal services or licensing of one’s name and likeness: it’s taxable, whether it’s paid in cash, product, or anything else of value. Because most athletes receive this income as independent earners rather than as employees, it’s typically reported on a 1099-NEC rather than a W-2, which shifts several responsibilities: withholding, quarterly payments, self-employment tax, onto the athlete that a traditional paycheck would otherwise handle automatically.
Self-Employment Tax, Explained
Independent-contractor income carries both ordinary income tax and self-employment tax, which covers the Social Security and Medicare contributions that an employer would normally split with an employee. For someone used to a W-2 job or none at all, this is often the biggest surprise: self-employment tax adds a real percentage on top of income tax, on the full amount earned, not just take-home pay.
Quarterly Estimated Payments
Because no one is withholding tax from an NIL check or a revenue-sharing deposit, the IRS generally expects the recipient to pay estimated tax four times a year rather than in one lump sum the following spring. As an illustration only: an athlete who earns a meaningful amount in NIL income over a year would typically set aside a substantial portion of each payment, commonly discussed in the range of a quarter to a third, specifically for tax, and pay it in installments rather than spending against the full check. The right percentage depends on total income, state of residence, and other factors a tax professional should calculate for that specific athlete.
In-Kind Compensation Is Taxed Too
An in-kind payment (product, equipment, services, use of a vehicle) is still compensation. It’s valued at fair market value and taxed accordingly, whether or not any cash changed hands. This is one of the most common places athletes get caught out: receiving several thousand dollars in product creates a real tax bill with no cash attached to pay it, which is why some athletes ask for at least a partial cash component in in-kind-heavy deals specifically to cover the resulting tax.
Multi-State Filing
An athlete may owe tax in more than one state: their home state, their school’s state, and potentially any state where they performed NIL activity: an appearance, a photo shoot, a game played on the road. Multi-state filing is common in this population and is frequently missed by athletes filing on their own for the first time.
Are Scholarships Taxed?
Generally, no. Amounts applied to tuition and required fees are not taxable. Amounts covering room, board and incidentals generally are taxable, which is true independent of anything related to NIL or revenue sharing and is often overlooked because scholarships don’t feel like “income” the way an NIL check does.
Deductions Athletes May Be Able to Take
Because NIL income is typically self-employment income, athletes may be able to deduct legitimate business expenses connected to earning it: things like travel to a paid appearance, equipment used specifically for content or promotional work, or a portion of home-office-style expenses tied to managing their NIL activity. What qualifies, and how it should be documented, is exactly the kind of question that belongs with a tax professional rather than general guidance, since it depends heavily on the athlete’s specific situation.
What Schools Can and Cannot Advise On
Compliance staff can explain that NIL and revenue-sharing income is taxable, point athletes toward general resources, and flag the existence of obligations like quarterly payments and multi-state filing. What compliance offices generally should not do is give an individual athlete specific tax advice or prepare their return, which crosses from education into personalized advice the school isn’t positioned to give, and most institutions are explicit with athletes that a CPA or tax professional is who they should turn to for their actual numbers.
Frequently Asked Questions
Q. How is NIL income taxed?
Usually as self-employment income reported on a 1099-NEC. That carries both income tax and self-employment tax covering Social Security and Medicare, a meaningful additional burden that surprises athletes who expected a normal paycheck.
Q. What about revenue-sharing payments from a school?
Also taxable. Treatment has varied between institutions, and how schools report these payments is an area still being worked out. Athletes should confirm with their school how their payments are being reported.
Q. Are in-kind deals taxable?
Yes, at fair market value. This is the most common trap: receiving a large amount of product creates a tax bill with no cash attached to pay it.
Q. What about state taxes?
Athletes may owe tax in their home state, their school’s state, and potentially any state where they perform NIL activity. Multi-state filing is common and frequently missed.
Q. Do scholarships get taxed?
Amounts applied to tuition and required fees are generally not taxable. Amounts covering room, board and incidentals generally are, which is true independent of NIL and often overlooked.
Q. Can my school’s compliance office do my taxes or tell me exactly what I owe?
No. Compliance can explain that this income is taxable and point you toward the general obligations involved, but your specific numbers are a matter for a CPA or tax professional, not the athletics department.
