Name, Image, and Likeness (NIL) Tax Implications for Student-Athletes

Key takeaways

• Students earning income from NIL opportunities will likely have to pay income tax on the earnings. 
• If you’ve been paid cash from NIL opportunities, you’ll need to file taxes on the payments. 
• Noncash compensation, such as trips, cars, or other goods is considered a taxable NIL earning.

Since 2021, student-athletes have been able to earn income through NIL opportunities.  College athletes can participate in NIL (name, image, and likeness) activities without impacting their National College Athletic Association (NCAA) eligibility.  

But is NIL money taxable? The short answer is yes.  

Student-athletes will need to file taxes because NIL income is taxable. And if you’re a parent, your child’s NIL earnings could impact your taxes too.  

Here’s what student-athletes and their families need to know about filing taxes when NIL income is involved.

Understanding NIL income

After legal challenges and public pressure, the NCAA changed its rules in 2021, allowing college athletes to earn money through NIL opportunities (as long as their school isn’t paying them directly).  

Students can earn NIL income by: 

• Endorsing products or services, including through social media partnerships 
• Making public appearances, including autograph signings 
• Permitting the use of their name, image, and/or likeness on products like T-shirts, water bottles, or video games 

Since their school can’t pay them directly, students receive compensation from private companies or with the help of an NIL collective. 

An NIL collective, which may be for-profit or nonprofit, is generally tied to a particular school but operates independently. The collective pools money from sources such as boosters, businesses, and fans to support student-athletes. Some pay athletes directly, while others focus on connecting them with business opportunities.

Taxability of NIL earnings

The IRS considers NIL income to be taxable income. 

NIL income includes both:

• Actual dollars received 
• Noncash compensation (cars, vacations,  workout equipment, etc) 

Student-athletes typically must report all NIL earnings on their federal tax return (dependent on income). In many cases, the athlete will receive a Form 1099 reporting their NIL payments. But even if they don’t, they’re still required to report any cash received and the fair market value of noncash compensation.  

Federal income tax

NIL income is subject to federal income tax. Depending upon how the income is reported to the student, if a student earns more than the standard deduction ($15,750 if filing single for the 2025 tax year), they typically must file a tax return. NIL income is considered self-employment income. If the student has net earnings greater than $400 from NIL, they must file a return.

International student-athletes attending school in the US aren’t exempt from tax filing requirements. Since they’re typically classified as nonresident aliens for tax purposes, they must file Form 1040-NR.

State and local tax

State tax rates vary, and some states don’t tax income at all. If a student-athlete receives NIL income in multiple states, they may have to file multiple state tax returns for states that impose income taxes.  

The state returns will either be filed as:

• A resident as in the state where they permanently live, such as where they lived with their parents before college
• A nonresident state is where they go to school or earn NIL income, if different from their resident state.
  

Though the student may be required to file multiple state returns, they won’t be double-taxed. Thankfully, there are rules to prevent them from having to pay taxes twice on the same income because of reciprocity agreements or tax credits for taxes paid to other states.  

Some cities and counties also collect local income tax. TurboTax will help you determine if you need to file any of these local returns, and can help you complete some of these local income tax filing requirements.

Self-employment tax

The IRS considers most student-athletes to be independent contractors, so their NIL income is considered self-employment income. 

If an athlete earns a net income (gross income minus expenses) of at least $400 a year, then their net earnings are subject to self-employment tax. The self-employment tax rate is 15.3%.

How to report NIL income

Depending on compensation, a student-athlete may receive different tax forms, including:

• 1099-NEC for direct cash payments of $600 or more 
• 1099-K for cash payments received through a third party, like Cash App or PayPal, totaling $20,000 and 200 transactions
• 1099-MISC for items received, such as cars or vacations, with a value of $600 or more 

These income sources should be recorded on Schedule C, part of the individual filing requirements when filing Form 1040. Generally, students must report all earnings on their tax returns, even if a tax form is not received to document the income.  

The OBBBA introduces significant changes to the reporting thresholds for Forms 1099-NEC and 1099-MISC. Starting with tax year 2026, the 1099-NEC and 1099-MISC thresholds will be increased to $2,000. 

Tax prep tips for students with NIL income

• Maintain detailed records of their NIL incomes and related expenses using bank statements, receipts, and other documents to accurately report earning and deductions.
• Consider making quarterly tax payments because their earnings won’t have income tax withheld from them, as a standard employee typically might.

Potential deductions and credits

College athletes may reduce their taxable income by deducting qualified business-related expenses. 

Potential deductible expenses include: 

• Travel to and from public appearances 
• Marketing, including the cost of maintaining a website 
• Equipment that supports their NIL activities, such as a microphone or computer 
• Services from an agent, accountant, or other professional 
• Cost of goods sold that generates NIL income, such as the cost of producing t-shirts or other merchandise sold

American Opportunity Tax Credit

TurboTax helps student-athletes and their families maximize deductions and identify the tax credits they qualify for. One valuable tax break is the American Opportunity Tax Credit (AOTC), the cost of college.  

The AOTC offers up to $2,500 per year for qualified education expenses, including:

• Tution
• Books
• Supplies

If a student is claimed as a dependent, their parents can claim the credit. If they aren’t claimed as a dependent, students can claim it themselves. And if the credit brings your taxable income to zero, you may be eligible to receive up to 40% of the remaining amount (up to $1,000) as a refundable credit. 

How NIL may impact financial aid and dependency status

A student’s NIL income could impact their financial aid package and dependency status.

Financial aid considerations

NIL income should be included on your Free Application for Federal Student Aid (FAFSA). This additional income could reduce the need-based student aid your child may be eligible to receive, including: 

• Pell Grants
• Financially-driven scholarships
• Other award programs

If a student-athlete receives scholarships for their role in university athletics, it is important to understand how this affects their tax return. Scholarships received greater than tuition, fees, and other qualified expenses are considered taxable income. If the athlete receives a scholarship in excess of tuition to cover room and board, for example, the excess amount must be included on the tax return. Scholarships are generally reported on the 1098-T received from the school.

Dependency status

Parents who provide more than half of their child’s financial support may be able to claim them as a dependent. Financial support includes costs related to:

• Housing
• Food
• Clothing
• Necessities
• And more for your dependent

However, if their NIL income is more than the support they are receiving from you, it’s possible they no longer qualify to be your dependent.  

Moreover, if your child is over the age requirement (must be under age 19, or under 24 and a full-time student for at least five months) to be claimed as a dependent child, you may be able to claim them as a dependent relative. But they can only be claimed as a dependent relative if they did not make over $5,200 in 2025. 

If your child can no longer be claimed as your dependent, you can’t claim education credits for them on your tax return. 

Simplify NIL taxes with TurboTax

Earning NIL income means filing taxes, and that can get complicated. Between self-employment taxes, deductions, and estimated payments, it’s important to stay on top of tax responsibilities to avoid penalties and keep more of what’s earned. But with TurboTax on your team, you don’t have to tackle tax season on your own.

TurboTax is here to provide NIL tax tips and expert guidance, including:

• Determining if self-employment taxes apply 
• Identifying and claiming tax deductions and credits to minimize tax liability 
• Reducing manual data entry by automatically importing 1099s 

Have questions about NIL taxes? Get real-time, personalized guidance from an expert with TurboTax Experts.