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NAME, IMAGE & LIKENESS (NIL)
Since 2021, the NCAA has allowed student athletes the opportunity to benefit from their Name, Image, and Likeness (NIL) without jeopardizing their NCAA eligibility. That's why we're providing free resources to help students understand the impact of receiving NIL payments.
HOW DOES NIL AFFECT STUDENT ATHLETE TAXES?
As a student athlete, NIL can have an affect on your taxes, but many athletes are unaware of the potential consequences for students and their parents.
GET OUR NIL GUIDE
WHAT'S THE MINIMUM TO QUALIFY?
Student athletes that receive cash or services and/or items that value $600 or more will be required to file their taxes.
HOW DOES THE IRS KNOW ABOUT YOUR NIL INCOME?
The person or business paying the student athlete will issue a 1099 of some kind, all of which are subject to self-employment tax.
WHAT ARE MY OPTIONS FOR FILING TAXES?
Liberty Tax is ready to help student athletes tackle their tax problems in-person, online, or with a remote tax preparer.
TAX TIPS FOR FIRST-TIME TAX FILERS
Everyone has to start filing taxes eventually. If you've never filed before, we've got you covered.
VIEW THE TAX TIPS
WHAT COUNTS AS NIL INCOME?
Student athletes can gain income through NIL in a number of different ways. They can profit off endorsements, apparel sales, corporate partnerships, charitable appearances, teaching camps, and starting their own businesses. They can also be paid for developing their own merchandise, promoting products or services, and appearing at events due to their personal celebrity. “NIL rights” allow college athletes to profit from sponsorship deals, autograph fees, social media, promotional appearances, and marketing their own brands. Social media and brand endorsement deals are the most popular revenue source for college athletes.
AUTOGRAPH SIGNING
RECEIVING
CARS
CONTENT CREATION
EVENT APPEARANCES
MERCHANDISE SALES
PRODUCT PROMOTION
TEACHING
CAMPS
RECEIVING GIFTCARDS
X
INSTAGRAM
FREQUENTLY ASKED QUESTIONS
Taxes can be difficult if you choose to file alone, or with the wrong partner. At Liberty Tax, we're committed to building long-term relationships with our clients across the country. Get answers to common questions below, and contact us if you need any additional information.
Before you start receiving income from an NIL deal, you should be aware of steps to take prior to receiving income. In most instances, you will be required to complete Form W-9, Request for Taxpayer Identification Number and Certification, so that the entity paying you can report the income that you received to the IRS. The IRS uses this information to match your reported income when you file your tax return.
In situations where you are deemed to be an employee, you will be required to complete Form W-4, Employee’s Withholding Certificate, so your employer can determine how much federal income tax to withhold from your wages.
The IRS has the authority to file liens against your property, garnish wages, take money in your bank or other financial account, and seize and sell your vehicle(s), real estate, and other personal property. If you fail to file required tax returns timely or fail to pay the tax due, you could be subject to penalties and interest.
If you do owe tax or penalty, you should pay the balance as soon as possible to avoid additional penalty and interest. The IRS has various options for making payments (https://www.irs.gov/payments). If you cannot pay your balance in full you may be eligible for one of the options below:
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- A payment plan to pay off your balance over time (https://www.irs.gov/payments/online-payment-agreement-application).
- Requesting penalty relief (https://www.irs.gov/payments/penalty-relief).
- Settling your tax debt for less than the full amount you owe (https://www.irs.gov/payments/offer-in-compromise).
- A temporary delay of the collection process if your balance is currently not collectible (https://www.irs.gov/businesses/small-businesses-self-employed/temporarily-delay-the-collection-process).
Remember, the amount of financial aid afforded to a student via FAFSA is determined based on income. A student athlete may receive less financial aid from FAFSA because their income has increased from NIL deals.
Complex issues could arise with respect to the student-athlete’s residency status. A student-athlete’s “home state” normally will remain his or her state of residence even if the athlete leaves that state to play for a university in another state. For example, an athlete who is a resident of California but attends the University of Texas will generally remain a California resident for state income tax purposes. In addition, those college athletes who go to more than one state to earn NIL will also have to contend with multiple state income tax laws and tax filings. Student-athletes will need to understand the domicile and statutory residency rules and the factors for establishing residency for the state in which they attend school and their “home state” if they intend to change their residency to the state where the university is located.
Not all states impose income taxes, but other states can impose tax at rates up to 13.3 percent, and the rules on tax deductions can vary. If a state imposes a personal income tax, the student-athlete’s residence state will tax the athlete’s income from all sources while nonresident states (including the state where the athlete’s university is located and states where the athlete plays games or makes appearances) could tax a portion of the athlete’s NIL earnings.
As of August 2022, 32 states have NIL laws, 26 of which have laws currently in effect. These states modeled their laws on California’s “Fair Pay to Play Act,” which was the first state NIL law enacted. Under the NCAA’s interim NIL policy, student-athletes who attend school in a state with an active NIL law must comply with that law, in addition to any institution and conference policies. Students who attend school in a state without active NIL legislation must only comply with any institution and conference policies. Student-athletes could also owe income taxes on NIL earnings in their state of residency unless that state does not have an individual income tax. Income tax rates and deductions vary substantially from state to state.
Parents that claim their student athlete dependents on their annual tax return may no longer be able to do so, which means many of the dependent tax benefits a parent uses to reduce their taxable income are gone. Student Athletes that have never filed a tax return in their young adult lives are now responsible for timely filing and paying their federal and state taxes.
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NIL PARENT RESOURCES
If your child has accepted taxable income from NIL, your taxes and filing status will also be affected.
