House v. NCAA settlement
As of July 1, 2025, the NCAA has introduced a new system that allows Division I colleges to directly pay athletes through a school-managed salary pool—capped at $20.5 million per year per school. This major change means that student-athletes may now receive guaranteed financial compensation from their university, in addition to any outside NIL (Name, Image, and Likeness) deals.
Unlike the scholarships that used to be a student-athlete’s only direct compensation for playing, NIL payments are taxable income.
Most NIL payments probably don’t come with taxes withheld.
Gifts
Athletes should also remember that when they receive non-cash gifts, these gifts become taxable income.
A popular example is cars. If a car dealership lets an athlete drive a vehicle for free that would normally cost $750 per month to lease, the market value of the gift is taxable income.
In this scenario, the athlete would generate $9,000 of taxable income for the 12 month period, even though no cash was exchanged.
If you are an athlete who receives noncash payments, you will want to make sure that you save money from other cash NIL payments for taxes on their noncash income.
NIL Go
NIL Go is the NCAA’s official system for managing and approving NIL deals. NIL Go is centralized platform managed by Deloitte.
Any NIL deal over $600 — like sponsorships, social media promos, or endorsements — must be reported through NIL Go to make sure it follows NCAA rules and reflects fair market value.
Self Employed
Student-athletes who receive NIL income are considered self-employed individuals.
Self-employed individuals must pay the employer and employee portion of FICA and Medicare taxes, which total 15.3 percent of income up to the FICA cap of $168,600 (as of 2024) and 2.9 percent on any income above the FICA cap.
If the income is reported on a 1099, then the below information may be useful. (*Always check with a tax advisor or CPA professional).
CHECKLIST FOR ATHLETES NAVIGATING NIL TAXES
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What is NIL Income
1. NIL income includes money earned from sponsorships, endorsements, appearances, autographs, and other activities leveraging an athlete’s name, image, and likeness.
2. Free Stuff - it is not fully free. Non-cash compensation (e.g., free products or services) is taxable at its fair market value.
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Federal Income Taxes
1. NIL income is subject to federal income tax.
2. The tax rate depends on total annual income, ranging from 10% to 37%.
3. Self-Employment Tax (15.3%) applies to NIL earnings, covering Social Security and Medicare.
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State Income Taxes
1. Determine if your state has an income tax (e.g., Washington, Texas, and Florida do not).
2. If earning NIL income in multiple states, be prepared to file taxes in each state where income was earned.
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The "Jock Tax"
The "jock tax" is a state income tax imposed on earnings from professional athletes (and sometimes entertainers) for games or appearances performed in a particular state. Since athletes often work in multiple states, each state where they earn money can require them to pay taxes on the income earned while in that state.
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Does the Jock Tax Apply to NIL Athletes?
Yes, the jock tax can apply to college athletes earning NIL income if they receive payments or benefits for appearances, events, or activities performed in a state with income tax. Here’s how it might work for NIL athletes:
• If a college athlete travels to another state for a promotional event, commercial shoot, or NIL-sponsored activity, they may owe income taxes to that state on the income earned during that visit.
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Quarterly Estimated Taxes
NIL income is not subject to automatic withholding, which mean you will need to hold back your own income to pay for the taxes due at the end of the year.
File quarterly estimated taxes using IRS Form 1040-ES to avoid penalties.
Due dates: April 15, June 15, September 15, and January 15 (following year).
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Business Expenses and Deductions
You may be able to reduce some of your tax owed by using deductions. Some examples could be:
• Agent or legal fees
• Marketing or promotional costs
• Travel expenses related to NIL activities
• Home office expenses if used for NIL business purposes
Keep receipts and records of all expenses.
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State Residency Rules
Confirm your state of residency for tax purposes.
If relocating to a state with no income tax, establish clear residency within that state by getting your driver’s license registration updated to reflect the new state.
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Recordkeeping
Maintain detailed records of:
• All income earned (cash and non-cash)
• Business-related expenses
• Contracts and agreements
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Hire Professionals
Work with a tax advisor or CPA experienced in athlete or NIL taxation.
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Saving for Taxes
Set aside at least 30-40% of NIL income for taxes.
Open and use a separate bank account that is only for NIL.
Disclaimer:
We are not tax professionals and the information provided should not be considered tax advice. Always consult with a certified tax professional or CPA to ensure your specific financial and tax needs are properly addressed.
NIL (Name, Image, and Likeness) Q&A
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Why an LLC?
An LLC is a simple business structure that:
Protects your personal assets
Allows tax write-offs for legit business expenses (training, travel, gear)
Shows professionalism to brands, sponsors, and agents
Please consult with a legal advisor.
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Does where I live matter?
Your residency status could matter in determining whether you will pay an additional tax, the state income tax.
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Are high school athletes eligible for NIL?
Eligibility for NIL by high school athletes is governed by each state and remains state specific.
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What else?
Every state has different laws and you should check with your athletic department.
You can hire an agent, attorney and tax professionals to negotiate for you and guide you. Make sure you hire someone who knows the unique rules in your state.
Pay attention to when your NIL contract ends
Be aware not to dilute your NIL value. What you say and do in public matters as much as what you do on the field or court.
Additional Resources for NIL Athletes