What are Alston Awards and the Tax Implications?

By now, you have probably heard that high school and college athletes can use their Name, Image, and Likeness (NIL) to make money while playing college sports, but there is a second form of compensation for NIL athletes called Alston Awards.

You may be wondering, “What are Alston Awards?” and “How Do Alston Awards Impact Taxes?”

Don’t worry if you haven’t heard about Alston Awards and the tax implications. TurboTax has you covered and is here to break down what this fairly new but little-talked-about award is and how it is taxed.

What are Alston Awards?

Following the NCAA vs. Alston lawsuit, Alston Awards were allowed beginning August 2020. Alston Awards are another form of compensation for college athletes. Alston Awards are education-related financial awards provided directly by universities for academic-related expenses up to $5,980 per year. 

Although the awards have not been a topic of conversation like earnings from NIL deals, for some college athletes, these financial awards are more than some athletes earn on NIL deals their entire college career making this also an important topic. The amount of the award is determined by individual universities and has different ranges up to $5,980 per year and different requirements in order to receive them. Some universities require students to attend tax and financial education sessions as a requirement to receive the Alston rewards. Some universities may also require students to maintain a certain grade point average in order to receive it. No matter how much is received or what the requirements are, there may be tax implications.

How are Alston Awards Taxed?

Because Alston Awards are educational financial awards for academic-related expenses, they generally should not be taxable if used directly for qualified education expenses just like other college scholarships or grants. Like college scholarships and grants, Alston Awards could be taxable if the awards are not used for qualified education expenses. In order to be tax free the following requirements need to be met:

1. You must be a candidate for a degree at an eligible educational institution.
2. It doesn’t exceed your qualified education expenses;
3. It isn’t designated for other non qualified education expenses and doesn’t require that it can’t be used for qualified education expenses; and,
4. It doesn’t represent payment for teaching, research or other services required as a condition for receiving the scholarship.

Per the IRS, qualified education expenses are tuition and fees required to enroll at or attend an eligible educational institution, course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. 

The following items are not considered qualified education expenses and would be taxable portions of the award:

• Room and board
• Travel
• Research
• Clerical help
• Equipment and other expenses not required for enrollment in or attendance at an eligible educational institution

How Would My Other Income Impact the Taxation of Alston Awards?

There may be no impact at all, but if you have Alston Award money that was not used for qualified education expenses mentioned, you may have a taxable portion which could increase your taxes when including the taxable portion with any net income from NIL deals.  If you have NIL deals remember to deduct all of your related expenses like marketing, advertising, and travel to lower your taxes.  

If you have a taxable portion of Alston Awards and no other earnings, you may not owe any taxes since you can also deduct the standard deduction up to $14,600 for tax year 2024($13,850 single for tax year 2023). Also, don’t forget you may be able to claim one of the education tax benefits like the American Opportunity Tax Credit, up to $2,500 for the first four years of college or the Lifetime Learning Credit up to $2,000 for undergraduate, graduate and professional degree courses — including courses to acquire or improve job skills, further reducing any taxes.

Don’t worry about knowing the latest rules for NCAA athletes and the tax implications. No matter what moves you made last year, TurboTax will make them count on your taxes. Whether you want to do your taxes yourself or have a TurboTax expert file for you, we’ll make sure you get every dollar you deserve and your biggest possible refund – guaranteed.