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The landscape of college athletics is in constant evolution, often likened to the wild, wild west -- with the era of Name, Image, and Likeness (NIL) rights for student-athletes reaching full bloom. The Indiana Hoosiers college football program was transformed by the NIL machine – from a perennial loser struggling to stay out of the Big 10 conference cellar to newly-crowned national champion after only two years.
There are hundreds of millions of dollars in NIL deals across intercollegiate athletics. This edition of the Tax Clarity Newsletter aims to provide a brief, but accessible overview of NIL, explain how student athletes — university, junior college, even high school — can earn income, and cover the basic tax implications for both student athletes and their parents.
🧾 FIRST UP: What is NIL?
NIL refers to the rights of student athletes to profit from their personal brand. This means that college athletes can now receive compensation for the use of their name, image, or likeness in various commercial activities. Prior to a settled lawsuit, actions by the United States Congress and collegiate athletics governing bodies, student athletes were not permitted to receive payments or endorsements related to their athletic status. NIL reforms have opened the door for many new opportunities.
NIL rights allow athletes to participate in sponsorships, endorsements, revenue sharing, social media promotions, and other ventures, provided they follow rules established by the National Collegiate Athletics Association (NCAA), National Junior College Athletics Association (NJCAA) and state regulations.
The restructuring of governance in college athletics is a step intended to give student athletes more control over their financial futures while maintaining their collegiate eligibility. The NIL collective marketplace for the NJCAA was established back in 2023 in partnership with the company Opendorse. According to NCAA.org, “[a]n NIL deal is any agreement where you are compensated (money, products or services) for allowing a company, brand or person to use your name, image or likeness, such as social posts, event appearances or endorsements.“1
Since formally adopting an NIL policy2 in 2021, the NCAA has developed more detailed guidance on what is allowed and not allowed, and who must report NIL deals and when. The last part can impact student athlete’s eligibility back as far as their junior year of high school. The College Sports Commission also provides a wealth of useful information. One of that site’s most significant points of awareness is that “[s]tudent-athletes must report any non-cash benefits (like food, gear or services) if their total value is $600 or more.”3
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🧾 Sources of Payments to College Athletes
Student athletes can earn income from a variety of sources under NIL rules. Common payment sources include:
Endorsement Deals: Contracts with brands or companies to promote products, often through social media or appearances.
Sponsorships: Partnerships where athletes represent a company or product in exchange for compensation.
Social Media Promotions: Payments for posting sponsored content on platforms like Instagram, TikTok, and Twitter.
Autograph Signings: Earnings from signing memorabilia or participating in fan events.
Personal Business Ventures: Launching businesses, selling merchandise, or offering training sessions.
University Payments: In some cases, universities may facilitate or contribute to NIL opportunities, though direct pay for play remains restricted.
The IRS provides additional details on their NIL webpage4. Amounts and types of deals can vary widely, with high-profile athletes at major universities often securing significant contracts from so-called NIL collectives associated with their school. Those at smaller colleges and junior colleges may find more modest opportunities.
“Student-athletes must report any non-cash benefits (like food, gear or services) if their total value is $600 or more.”
—The College Sports Commission
🧾 NEXT UP: Tax Implications for Student Athletes and Their Parents
NIL income is considered taxable by the Internal Revenue Service (IRS). Student-athletes who receive payments must report this income on their tax returns. Part of the controversy surrounding the NIL environment is an athlete’s status with respect to the team and school that he or she plays for.
Student-athletes with NIL contracts are not currently classified as employees of universities or athletic departments, but this remains one of the most hotly debated legal issues in collegiate athletics. According to an article in The National Law Review yesterday5, actions by Federal courts and shifting positions from the National Labor Relations Board in the Biden and Trump Administrations since 2024 have led to some instability. Last July, the White House issued an executive order6 leaning its weight against classification as employees.
Without employee status, an entity providing compensation will not deduct amounts for state, local, and federal income taxes from compensation unless the student-athlete (i.e., taxpayer) asks for income tax withholding. Taxes for social security and unemployment are also not withheld. But that does not mean the student athlete is not responsible for these taxes against their compensation.
🧾 First the Substance…Now the Tax Forms
Besides the individual Form 1040, the most relevant Federal tax forms in this environment are:
Form 1099-NEC (Nonemployee Compensation)
W-9
Form 1040-ES
Schedule C (Form 1040)
Schedule SE (Form 1040)
Taxpayer’s copy of blank IRS Form 1099-NEC (2025)
Some key considerations include:
Self-Employment Income: Most NIL payments are treated as self-employment income, which means student athletes may be responsible for both income tax and self-employment tax (Social Security and Medicare). This is 15.3% of the athlete’s compensation from the NIL collective.
Filing Requirements: Student athletes must file federal and state tax returns if their income exceeds certain thresholds. Keeping accurate records of payments and expenses is essential.
Estimated Taxes: If athletes expect to owe $1,000 or more in taxes, they may need to make quarterly estimated tax payments. This is also known as Federal income tax withholding.
Student-athletes need to file a tax return if they make at least $400 in NIL self-employment activities (for self-employment tax reporting) or if total income is more than the standard deduction. The amount of the standard deduction depends on amount of total annual income and whether anyone (such as a parent providing a measure of financial support) can claim the student-athlete as a dependent.
🧾 What about my parents…how might this impact them?
For parents, the ability to claim a student-athlete as a dependent may be affected by the athlete’s income and support from the school. Generally, parents can claim their child as a dependent through age 24 if the student is a full-time college student and does not provide more than half of their own support. However, significant NIL income could change this calculation.
Student-athletes are generally considered independent contractors for tax purposes and receive Forms 1099 or 1099-NEC if their income is $600 or more from one source. It is important for student athletes and their parents to consider consulting a tax professional to determine impacts of receiving NIL compensation. Maintaining dependent status for student-athletes in your family may affect eligibility for other family tax benefits, such as college financial aid for other children, child tax credits, deductions, and exclusions from taxable income.
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There’s the scoop, everyone! Thanks for taking time to check out this week’s edition of the Tax Clarity Newsletter.
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References (6):
1 Student-Athletes, NIL (Name, Image, and Likeness), NCAA.org, last accessed January 23, 2026.
2 NCAA adopts interim name, image and likeness policy, NCAA.org, last accessed January 23, 2026.
3 Fact Sheets for Student-Athletes, College Sports Commission, last accessed January 23, 2026.
4 Name, Image, and Likeness Income, IRS.gov, last accessed January 23, 2026.
5 O’Hare, Maggie, Opening a New Playbook- How the House Settlement and NLRB Are Reshaping Labor Rights in College Sports, The National Law Review, January 23, 2026, accessed January 23, 2026.
6 Saving College Sports, White House Executive Order 14322, July 24, 2025, 90 FR 35821, published July 29, 2026. Accessed January 23, 2026.
DISCLAIMER: The information in this newsletter is derived from public information, provided for education purposes. It is not provided as a financial advisory service and should not be relied upon as such. For advice on a specific tax matter, please consult a tax professional.