The name, image, and likeness era has been a game-changer for student athletes. For the first time, college and in many cases high school athletes can earn real money from endorsements, social media sponsorships, autograph signings, camps, and merchandise arrangements. But with that opportunity comes a tax responsibility that many young athletes and their families are not prepared for.
The IRS Sees Your Athlete as a Business Owner
Most NIL arrangements classify athletes as independent contractors rather than employees. That means no employer is withholding taxes on their behalf. Instead, the athlete receives a Form 1099 at year end and is expected to report that income on Schedule C as self-employed business income.
NIL income can take many forms, and all of it is taxable:
- Cash payments from endorsements, sponsorships, and appearances
- Social media and content creation fees
- Camp and clinic earnings
- Autograph signing fees
- Non-cash compensation such as merchandise, equipment, or gifted products, all taxable at fair market value
The implications are significant. In addition to federal and state income tax, self-employed individuals owe self-employment tax, currently 15.3%, on top of their regular income tax rate. For an athlete who has never filed a tax return before, the combined bill can easily reach 30% or more of gross earnings.
Revenue Sharing Adds Another Layer of Complexity
Beginning in mid-2025, universities began sharing revenue directly with athletes under new frameworks. Unlike traditional third-party NIL deals, these payments may ultimately be classified as wages reported on a Form W-2 rather than independent-contractor income on a 1099. The distinction matters:
- A 1099 means no taxes are withheld, and the athlete is responsible for paying the full amount themselves
- A W-2 generally means the university withholds income and payroll taxes before the check is issued
Because many universities were not set up to add athletes to payroll mid-year, some of these payments were still issued on 1099s in 2025. The classification is still evolving, and athletes who received revenue-sharing payments should make sure their tax professional understands how those amounts were reported.
Quarterly Estimates and Timing Are Critical
For athletes paid without withholding, the timing of income creates an additional challenge. NIL payments can arrive in a lump sum, in staggered installments, or at any point throughout the year, but federal estimated tax deadlines stay fixed. Missing them can result in underpayment penalties.
Without a plan in place, that money may be gone before the bill comes due. Athletes who receive uneven income may be able to use the prior-year safe-harbor rule or the annualized income installment method to manage estimated payments, but both approaches require planning and professional guidance well before the first payment is received.
State Taxes Compound the Bill
Federal taxes are only part of the picture. Athletes who compete or earn income across state lines may owe state income tax in multiple states. Similar to the jock tax rules already applied to professional athletes, states may increasingly apply multi-state income tax rules to college NIL income as well.
Families of high school athletes being recruited across state lines are already factoring these questions into their decisions:
- Athletes in states with no income tax, such as Tennessee or Florida, face a lower overall tax burden
- Athletes in higher-tax states owe state income tax on top of federal income and self-employment taxes
- Multi-state activity can add significant complexity to the annual filing
Planning Before the First Deal Is the Key
The athletes who handle NIL income successfully tend to have one thing in common: they build a support system before the money arrives. A few steps that make a real difference:
- Engage a tax professional early, ideally before a deal is signed, to set up a budget and quarterly payment plan
- Track deductible business expenses such as agent fees, professional photography, and content creation equipment
- Keep clean records from the beginning to simplify year-end reporting
- Set aside a portion of every payment for taxes before spending the rest
Universities have an important role to play as well. Schools that connect athletes with qualified advisors are helping protect both the athlete and the integrity of their programs.
Planning Ahead
NIL income is a real opportunity, but it comes with real tax consequences that compound quickly without proper planning. Whether you are a student athlete who just signed a first deal, a parent helping a high schooler navigate the recruiting landscape, or a family with a college athlete already earning NIL income, getting ahead of the tax obligations is far less costly than catching up after the fact.
If you have questions about NIL income, self-employment taxes, estimated payments, or state tax exposure, contact your ShindelRock tax professional. We can help you understand what is owed, build a plan to stay current, and make sure the focus stays where it belongs: on the game.
Written by: ShindelRock
