While all eyes have been on Wemby and our beloved Spurs, we’ll soon be turning our attention to college football season. With NIL, college athletes have had financial management challenges thrust upon them earlier than most are ready. And you know what that means: taxes. More than their share of taxes (and tax troubles) if they aren’t prepared. 

What Is NIL?

Name, Image, and Likeness (NIL) is the right of an athlete to be paid when businesses use their personal brand—their name, social media presence, autograph, or appearance—to promote something. That can include endorsement posts, autograph signings, camps, appearances, podcast ads, or getting “paid” in free gear, travel, or other perks instead of cash.

The National Collegiate Athletic Association (NCAA) changed the game on NIL in 2021 with the adoption of its Interim NIL Policy, which the IRS recognizes. In the eyes of the IRS, almost all NIL benefits are taxable income, including non‑cash items like merchandise, gift cards, or travel, based on their fair market value. Scholarships used for qualified tuition and required fees can still be tax‑free, but NIL money is separate and usually taxable. 

How Does NIL Affect Taxes?

College athletes legally receive NIL in two ways. It’s possible they could be treated as employees of the college or the brand that pays them (in which case, they will receive a W-2 with taxes already withheld). But in many cases, they’re treated as independent contractors. That shifts the responsibility to the athlete to track income, deduct expenses, and pay both income tax and self‑employment tax (Social Security and Medicare) on their net NIL earnings.

Because no taxes are typically withheld from these payments, athletes may need to make quarterly estimated payments using Form 1040‑ES to avoid penalties. On top of that, if they do appearances, signings, or events in multiple states, they may owe state income tax in each state where they earned NIL income. Suddenly, a 19-year-old is operating a multi-state business. This can get tricky fast, because many endorsement opportunities can take athletes to unforgivingly tax-heavy states like California and New York. Those receiving financial aid, including Pell grants, need to understand how NIL might affect their eligibility from year to year as well. 

Overarching Tax Lessons

The tax rules for NILs mirror those for fledgling small businesses that do contract work. Something else to keep in mind if you’re a parent of a teen or young adult: Your child or young adult doesn’t need to be a gifted athlete to be hit with independent contractor taxes. Many have access to gig work—including delivery driver jobs and earning money from social media—that can lead to complex tax issues.  

For this reason, anyone making independent contractor money—NIL or not—should:

• Track everything: Keep at least a simple spreadsheet (or app) listing every payment and every non‑cash benefit, plus who paid it and what it was for.
• Save for taxes: As a rule of thumb, set aside 25–30% of each payment in a separate account for taxes, whether you are an athlete, influencer, or solo entrepreneur.
• Capture legitimate expenses: Travel for appearances, marketing, website costs, agent fees, and part of your phone or internet used for business can often be deductible.
• File and pay proactively: Know your filing deadlines, use the IRS’s estimated tax system if no one is withholding for you, and work with a tax pro early so you’re not scrambling—or paying penalties—next April.

NIL athletes, in particular, should build a business mindset from the start, with a rock-solid advisory team that includes financial, tax, and legal professionals. With the right planning, you can strip out as much risk and tax surprises as possible from the amazing opportunities coming your way.

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Shutterstock_2422242315_June 16, 2026