How is NIL Income Taxed for Collegiate NCAA Athletes? | Tax Planning for Student Athletes

What Is NIL Money?

On July 1st, 2021, the NCAA passed an interim policy allowing student athletes to profit from “Name, Image, and Likeness” (NIL) activities. This change came after the Supreme Court’s unanimous ruling in NCAA v. Alston that the NCAA cannot limit academic-related payments to students, opening up the possibility for athletes to earn an income through their NIL. This includes:

NCAA logo

  • Guest appearances at clubs or other public events, such as autograph signings
  • Sports events
  • Endorsements
  • Content creation
  • Exhibitions
  • Gifts or giveaways
  • NFTs

Any money that an athlete earns through the use of their name, image, and likeness is considered NIL money.

Is NIL Money Taxable?

The NCAA’s new policy has already benefited thousands of collegiate athletes across the country. But, it’s important to remember that NIL income is taxable just like any other type of income. If you or a family member are a college athlete looking to capitalize on NIL activities, you’ll need proper accounting to maximize your benefits.

Boxelder Consulting’s team of skilled accountants is uniquely qualified to offer help to student athletes and their families: six of our team members are former collegiate athletes themselves. So not only do we understand the tax code like the back of our hand, we also know from experience what it’s like to be in a collegiate athlete’s shoes.

Here is everything you need to know about collegiate NIL rights, and how income from NIL activities is taxed.

What Are NIL Rights & How is NIL Income Taxed for College Athletes?

NIL rights are a student athlete’s ability to profit off the use of their name, image, and likeness. If you were able to earn a NIL income over the last year, you were most likely paid as a 1099 independent contractor. If you earned more than $600 in the year 2021 from NIL money, the person or company that paid you will report the payment on a Form 1099 (which they’ll send to you), and you will have to report the income on your Form 1040 when you file your tax returns.

If you’re not sure how to report your income and want to ensure that you’re filing your taxes correctly, contact us at Boxelder today and we’ll help you do things right.

 

How Will I Be Taxed for NIL Payments That Aren’t Cash?

How you’re taxed for NIL depends entirely on how your income is classified. Most commonly, you will be taxed as an independent contractor. If you were paid with crypto currency, you will still need to file this income: you will be considered self-employed, and if you profit from crypto sales, you’ll be taxed on those gains as well.

If you received free products or gifts in exchange for advertising or influencing, you will also need to report the fair market value of the items as part of your income. Even if you didn’t make the income requirements ($600 minimum), you should still claim your income on your tax return.

 

Tax Deductions For Collegiate Athletes

Generally, and if you earned more than $400 in the calendar year from NIL, you will pay self-employment taxes which are set at 15.3% of your net income. If you believe you’re set to owe more than $1,000, we recommend you pay quarterly estimated taxes. In order to profit off your NIL as efficiently as possible, you should claim tax deductions to decrease the taxes you pay each year.

Here are a few expenses you can claim as deductions to maximize your tax savings related to NIL activities:

  • Airfare, hotel, or car expenses
  • Website fees
  • Marketing and agency fees

If you aren’t sure if you qualify for these tax deductions, don’t worry. Our Boxelder accountants can help you file your tax returns on time, while maximizing your deductions.

 

Tax Planning For Collegiate Athletes

As a collegiate athlete, you also have the opportunity to benefit from the following tax benefits:

If you’re looking for  further resources to understand the tax implications and rules surrounding NIL income, the NIL Summit at Duke University is a great place to start. If you want to know more about the deductions you can claim on your taxes as a result of NIL income, don’t hesitate to reach a Boxelder tax professional so we can further assist you.

At Boxelder, we’re not just a team of skilled accountants. Six of our team members are former college athletes, and we’re eager to provide our relevant expertise toward the success of your career. We understand the sporting side of being an athlete, and the financial side. As a specialized team of accountants, we’re eager to help you navigate the world of taxes, so that you can focus on your college career. Schedule a free consultation with our accounting team today!

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About the Author

A young professional standing by Colorado's Front Range

Mason Turner

Director of Accounting

Mason is Boxelder's Director of Accounting, and the head of our office in Wichita, Kansas. He graduated from McPherson College with dual majors in Sociology and Psychology, and a minor in Business. Mason’s been the Director of Accounting at Boxelder for over two years now, managing the workload for the accounting department and handling client relationships. Mason loves the culture at Boxelder, and loves helping people in need of tax advice. He married his wife in August of 2019, and they have two cats and two dogs. Mason enjoys sports, spending time with friends and family, and learning new things.

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