March Madness Tax Tips: How Student-Athletes Can Score Big with NIL Deals and Deductions

March isn’t just a slam dunk for college basketball fans—it’s also a potential layup for student-athlete earnings. While you might think of brackets and buzzer-beaters, there’s more to the madness regarding finances and tax implications.

Key Takeaways

• NIL earnings are generally taxable, like other income.
• Student-athletes need to keep detailed records of NIL business expenses.
• Professional tax advice is recommended for navigating NIL tax complexities.
• Setting aside 25-30% of NIL income for taxes is a good practice.

Understanding NIL Tax Implications

It’s important to note that student athletes don’t earn a salary directly from competing in the NCAA tournaments. However, being a top-seed contender can open up avenues for NIL (Name, Image, Likeness) deals and sponsorships, creating income opportunities that are far from a long shot.

When a player steps into the national spotlight, companies line up to associate their brands with these college stars. Sponsorship deals and endorsements can turn into significant earnings. 

Tracking Expenses Like a Pro

For those athletes cashing in on their newfound fame, knowing the tax game is as crucial as mastering any skill. NIL deals are taxable income and need to be reported. 

Those earning NIL income should proactively save receipts for expenses as they can be a qualified business deduction. This can include professional fees, training costs, and travel expenses related directly to their business. 

The Importance of Tax Planning

The excitement of significant earning potential also comes with tax responsibilities. Without careful planning, you could face a hefty tax bill. According to Teamwork’s Influencer Year 3 Data, for power 5 sports, the average NIL transactions reported are $5,911. To prepare for tax season, it’s wise to set aside a portion of NIL income. By doing so, athletes ensure they’ll meet their tax obligations and avoid any surprises come tax time. A good rule of thumb for those earning NIL income is to set aside 25-30% of earnings for taxes.

And for the ultimate clutch move, consulting with a tax expert like a TurboTax Live expert to navigate these financially thrilling times. Get matched with an expert based on your unique tax situation. They’ll handle your taxes from start to finish ensuring you get every dollar you deserve.

As the madness unfolds and emerging stars make headlines, remember: off-court financial moves can be just as pivotal as on-court performances. Keeping a close eye on potential earnings and their tax implications is the best strategy to avoid getting boxed out by the IRS.