Paying Taxes Is Part of Earning NIL Income
Earning income as a college athlete means more than playing the game.
It also means learning how to manage the financial responsibilities that come with NIL, revenue sharing, endorsements and other athlete income.
For families, taxes should not be an afterthought.
The legal landscape around NIL can vary by state, and different types of taxes may apply depending on where and how the athlete earns income. This article focuses on federal taxes and what college athletes should understand when NIL income is reported.
State taxes, local taxes, jock taxes and self-employment taxes may also apply, depending on the athlete’s situation.
NIL Income Is Usually Not W-2 Income
Federal taxes are money paid to the United States government based on income earned during the year.
A regular employee usually receives a W-2 form from an employer.
But a college athlete earning NIL income is usually not treated as an employee of the college or the company paying them. In many NIL situations, the athlete is treated more like an independent business owner or independent contractor.
That means NIL income may be reported through a 1099 form.
And unlike many regular paychecks, taxes are often not withheld up front.
That makes the athlete responsible for understanding and planning for the taxes owed.
Form 1099-NEC
A Form 1099-NEC is used for nonemployee compensation.
For NIL athletes, this may include direct payments for services such as:
- Brand sponsorships
- Social media endorsements
- Paid promotional appearances
- Collective compensation
- Other services performed by the athlete
This form is usually issued when a business or collective pays the athlete $600 or more in a calendar year.
Form 1099-MISC
A Form 1099-MISC is used for certain miscellaneous payments.
For athletes, this may include items that are not direct freelance compensation, such as:
- Physical prizes
- Awards
- Certain passive royalties
- Some likeness-related payments
This form is generally issued when payments total $600 or more, though some royalty situations may have different thresholds.
Federal Tax Brackets Matter
The amount an athlete owes in federal taxes depends on how much taxable income they earn and their filing status.
For example, an athlete filing as single with significant NIL income may fall into a higher tax bracket than expected.
That does not mean every dollar is taxed the same way, but it does mean families need to understand how income levels can affect tax obligations.
The key lesson is simple:
Do not spend NIL money as if every dollar is yours to keep.
Some of that money may need to be set aside for federal taxes, state taxes, local taxes or self-employment taxes.
Standard Deduction
One way taxable income may be reduced is through the federal standard deduction.
For the 2026 tax year, the basic federal standard deduction amounts referenced in the Seiler Group draft are:
- Single: $16,100
- Married filing separately: $16,100
- Married filing jointly: $32,200
- Qualifying surviving spouse: $32,200
- Head of household: $24,150
A standard deduction can lower taxable income, but it does not eliminate the need to plan.
Families should work with a tax professional to understand what applies to the athlete’s specific situation.
Deductible Business Expenses
Because NIL athletes may be treated as independent contractors, some business-related expenses may help reduce net taxable income.
Examples may include:
Professional Fees
Fees paid to accountants, lawyers, sports agents or other professionals may be deductible if they relate to the athlete’s business activity.
Travel and Transportation
Mileage, parking, flights and travel tied to paid appearances, promotional shoots or endorsement events may qualify as business expenses.
Marketing and Content Creation
Website hosting, digital tools, photography, advertising and content creation expenses may be part of the athlete’s business activity.
Equipment and Supplies
Phones, computers, ring lights, microphones and other equipment used for promotional content may also be relevant business expenses.
Good records matter.
Families should track receipts, contracts, invoices, travel and non-cash benefits such as free gear or travel paid by collectives.
Business Structures and Planning
Some athletes may eventually need to think about business structure.
LLC
Forming a Limited Liability Company may help separate the athlete’s personal life from their brand and business activity.
An LLC can also make recordkeeping, banking and contracts cleaner.
S-Corp Election
In some higher-income situations, an athlete may hear about electing S-corporation status for an LLC.
This can potentially reduce some self-employment tax burden on a portion of income, but it also adds rules, filings and complexity.
This is not something families should do casually.
A CPA or qualified tax professional should be involved before making that decision.
The Family Takeaway
Paying taxes is part of earning income.
That is true for professional athletes, college athletes and NIL athletes.
The earlier families understand 1099 forms, deductions, business expenses and tax planning, the better prepared they will be when money starts coming in.
NIL can be a real opportunity.
But opportunity comes with paperwork.
Families should work with a CPA, financial advisor and qualified professionals to understand the athlete’s specific tax obligations and build a plan before the bill comes due.
This section is educational and should not be read as financial, legal or tax advice. Families should consult qualified professionals for advice specific to their situation.
For questions, contact Ed Castellanos at The Seiler Group of Raymond James at ed.castellanos@raymondjames.com.