NIL Income Tax Implications for Student Athletes
The ability for student-athletes to earn money from their name, image, and likeness (NIL) has opened new doors, but it also comes with new tax responsibilities. At NTC Accounting Firm, we’re here to help student-athletes, their families, and their advisors navigate this evolving landscape.
What is NIL Income?
New opportunities for students to profit from personal brand
With the NCAA’s rule changes in 2021, student-athletes can now monetize their personal brand. This includes endorsement deals, merchandise, appearances, and more, giving them a new income stream alongside their education.
What does NIL mean?
NIL stands for Name, Image, and Likeness. It refers to an individual’s ability to earn compensation from the commercial use of their personal brand, such as signing autographs, appearing in commercials, or promoting brands online.
Changes to NCAA NIL rules
Previously, NCAA rules prohibited athletes from earning money for their NIL. That changed in 2021, when student-athletes were officially allowed to profit without losing eligibility, though schools themselves still cannot pay students directly.
Types of NIL income
- Brand endorsements
- Social media sponsorships
- Merchandise sales
- Paid appearances and autograph signings
- Running youth sports camps
- Non-cash benefits (e.g., use of a car, travel, gear)
What you need to know about NIL tax classification and reporting
NIL income is taxable by the IRS
All NIL income, whether cash or non-cash, is considered taxable by the IRS. In most cases, student-athletes are considered self-employed and taxed as independent contractors, meaning they are responsible for tracking their income and paying taxes directly.
Self-employment tax
If net earnings exceed $400, student-athletes must pay self-employment tax, which includes both Social Security and Medicare taxes. The self-employment tax rate is 15.3% on net earnings up to $168,600 (2025 cap), and 2.9% continues on income above that for Medicare.
Federal income tax for NIL
U.S. athletes must file federal tax returns when their NIL earnings exceed the standard deduction. Nonresident international students typically use Form 1040-NR. Most international students cannot legally earn active income unless explicitly authorized (e.g., OPT, CPT, or a special waiver). Violating this can risk visa status..
State and local tax for NIL
If student-athletes earn NIL income across multiple states, for example, through appearances or sponsorships, they may be required to file state tax returns in each jurisdiction. Some states have reciprocity agreements, while others do not.
What type of activities can athletes pursue in order to generate income?
- Brand endorsements: Promoting products and services via ads, commercials, or personal use.
- Social media partnerships: Earning money through sponsored posts, reels, and TikToks.
- Youth camps, coaching, appearances, and merch: Athletes can host training camps, coach younger players, or sell signed merchandise.
- Important note: Schools cannot pay students directly for NIL activities. Payments must come from third-party businesses or collectives.
How to report NIL income
Student-athletes may receive:
- Form 1099-NEC (Nonemployee Compensation)
- Form 1099-K (Third-party payment platforms)
- Form 1099-MISC (Other income)
They must report income on Schedule C (Profit or Loss from Business) when filing their Form 1040. Keeping accurate records of payments and expenses is essential for accurate tax reporting and claiming deductions. This includes tracking business-related expenses like travel, gear, website fees, marketing costs, or legal services. Many of these may be deductible.
What is the difference between active and passive income? And why does it matter?
- Active income is earned through performing services, e.g., signing autographs or promoting a brand. For international students on F or J visas, earning active income can be a violation of visa terms.
- Passive income includes royalties, rental income, and other investments. While often safer for international students, even royalties may count as “active” if tied to services performed.
- Portfolio income includes dividends, interest, and capital gains. It is typically not affected by material participation rules.
Understanding these distinctions is vital, especially for nonresidents, as violations can jeopardize visa status. This is a grey area. If royalties stem from a service, like promoting a product, the IRS may classify that as active income.
How NTC Accounting Firm supports NIL student-athletes
At NTC Accounting Firm, we support student-athletes and their families with:
- Tax advisory and filing services tailored to NIL income
- Bookkeeping and expense tracking for accurate deductions
- Financial consulting and long-term planning
- International student compliance guidance
Whether you’re a student-athlete, parent, coach, or advisor, our team can guide you through the complex tax implications of NIL. Just use this link and one of our team members will reach out to see if we can offer any guidance.