Death and Taxes

As the calendar year winds down, student-athletes earning income through NIL (Name, Image, Likeness) opportunities are approaching a critical period: tax season. For many, this may be the first time they face tax obligations, and the stakes are high. Misinformation or lack of preparation can lead to financial headaches or even legal troubles.

Here’s what you, as coaches, administrators, and service providers, need to communicate to help your student-athletes navigate this challenge confidently.

1. Taxes Are Inevitable—Prepare for Them Early

Student-athletes need to understand that any income earned through NIL activities is taxable. This includes:

  • Cash payments

  • In-kind compensation (like free products or gift cards)

  • Revenue from social media promotions, appearances, or camps

Action Step: Encourage athletes to set aside 35-40% of their pre-tax earnings to cover federal, state, and self-employment taxes. Opening a separate savings account specifically for taxes can simplify this process.

2. Federal and State Tax Obligations

The federal government taxes NIL income at rates ranging from 10% to 37%, depending on total earnings. For many student-athletes, federal tax liability begins at $12,950 (the standard deduction for single filers in 2023).

State taxes add another layer of complexity. Athletes may owe taxes both in their home state (where they claim residency) and in states where they earned NIL income.

For example: An athlete attends school in Florida (no state income tax) but earns income from appearances in New York (state income tax required).

Action Step: Advise student-athletes to consult a tax professional to determine where they owe state taxes and to avoid surprises.

3. Self-Employment Taxes and 1099 Forms

Most NIL income is considered self-employment income. This means:

  • Student-athletes must pay a 15.3% self-employment tax in addition to federal and state income taxes.

  • Entities paying them over $600 in a calendar year are required to issue a 1099 form. Athletes should track all NIL-related income, even if they don’t receive a 1099.

Action Step: Help student-athletes maintain a record of all NIL income and expenses throughout the year. Tools like spreadsheets or budgeting apps can make tracking easier.

4. Business Deductions: Save Money on Taxes

Student-athletes can deduct certain business-related expenses from their taxable income, reducing their overall tax liability. These may include:

  • Travel expenses for NIL-related activities

  • Equipment or clothing used for promotional work

  • Marketing materials or professional photography

  • Fees paid to agents, advisors, or tax professionals

Action Step: Encourage athletes to keep receipts and detailed records of expenses tied to their NIL activities. Consider introducing them to a tax preparer familiar with self-employment deductions.

5. NIL Income and Financial Aid

For athletes receiving financial aid, NIL income can be complicated. The FAFSA (Free Application for Federal Student Aid) includes taxable income in its calculations, which may reduce aid awards. However, some financial aid types are unaffected by NIL earnings.

Action Point: Encourage athletes to speak with their financial aid office to understand how their NIL income might impact their aid package. It’s better to be proactive than to face unexpected reductions.

6. Deadlines and Filing

Tax season officially begins in January, with the deadline for filing federal taxes set for April 15, 2024. Missing this deadline can result in penalties or interest charges.

Action Point: Remind student-athletes of key deadlines and emphasize the importance of filing on time. If they owe taxes and can’t pay in full, filing an extension or arranging a payment plan with the IRS can help avoid penalties.

7. The Role of Advisors

Taxes are complex, and for student-athletes earning significant NIL income, professional guidance can make a big difference. Trusted tax advisors can help ensure compliance while minimizing tax liabilities.

Action Point: Contact me for a list of financial advisors who have experience in NIL.

About Bill Carter

Bill has advised brands on Name, Image, Likeness for 25 years—first in pro sports, now at the college level. He was the Co-Founder of the Gen Z sports agency Fuse, which he sold in 2019. In 2020, he founded Student-Athlete Insights and consults on NIL strategy with Fortune 500 companies and 30+ DI universities. Read more about Student-Athlete Insights.

Bill Carter