NIL Income and Taxes: What College Athletes and Families Need to Know

At a Glance

The NCAA’s Name, Image, and Likeness (NIL) program has transformed college athletics, allowing student-athletes to earn money through sponsorships, appearances, and more. With new opportunities come tax responsibilities that many athletes and families have never encountered before. This article explains how NIL income is earned, reported, and taxed, what oversight rules apply, and how student-athletes—especially those in Maine—can prepare for the financial side of their new earning potential.

Contents

1. The New NIL Landscape
2. What Counts as NIL Income?
3. College Sports Commission Reporting
4. Tax Filing Basics
5. Additional Tax Considerations for NIL Athletes
6. Good Records Are Non-Negotiable
7. What to Look for in an Advisor
8. Looking Ahead

The New NIL Landscape

When Cooper Flagg arrived at Duke, he not only carried the expectations of an entire state but also represented how much the college landscape has changed. Just a few years ago, a Maine athlete of Flagg’s stature—like former University of Maine football standout Patrick Ricard, national track star Kate Hall, or Sanford native Rachel Schneider Smith—could have drawn major sponsorship interest but would have been barred from accepting it.

That changed in 2021, when the NCAA opened the door for college athletes to earn money from their Name, Image, and Likeness (NIL) through sponsorships, endorsements, appearances, merchandise sales, and more. The House v. NCAA settlement, finalized in June 2025, took this further—allowing Division I schools that opt in to pay student-athletes directly for their NIL rights.

Starting July 1, 2025, Division I schools can distribute up to about $20.5 million per year among athletes, with amounts varying widely by sport and role. Locally, the University of Maine has opted into the settlement, creating opportunities for athletes statewide—not just those at powerhouse programs.

While the new NIL landscape creates exciting earning potential, it also comes with something every athlete and family must understand: tax responsibilities. For many student-athletes, NIL work will mean handling taxes much like an independent business owner.

What Counts as NIL Income?

NIL income can come in many forms:

• Brand endorsements and sponsorship deals
• Social media influencer content
• Merchandise and memorabilia sales
• Autograph signings and promotional appearances
• Direct payments from your school under the settlement
• Non-cash benefits such as free apparel, cars, travel, or equipment

The IRS generally considers these earnings taxable—even if you never receive a paycheck in cash. Non-cash benefits are usually taxed at fair market value.

College Sports Commission Reporting

Any athlete entering an NIL deal must file with the College Sports Commission (CSC) if the deal is worth $600 or more in the aggregate. To facilitate this reporting, the CSC has created NIL Go, a platform for athletes to submit their deals with the primary goal of ensuring NIL deals have legitimate business purposes and are not, “pay to play” deals. This determination is based on three criteria:

1. Is the deal’s facilitator/sponsor an associated entity or individual of the athletics program? In other words, is the deal’s facilitator/sponsor closely related to the school’s athletics department?
2. Is there a valid business purpose for the deal?
3. Does the amount of compensation appear reasonable for the athlete given compensation paid to other similar athletes?

Deals will either be cleared or not cleared based on review by the CSC. Deals that are not cleared can be revised and resubmitted, appealed, or cancelled.

Tax Filing Basics

You must file a federal tax return if:

• You earn $400 or more from NIL self-employment income, or
• Your total income exceeds the standard deduction for your filing status

The reporting method depends on the type of income:

• Self-employment income (e.g., sponsorships, appearances, influencer work) is typically reported on Schedule C with Form 1040. This allows you to deduct eligible business expenses such as travel, equipment, marketing, professional services, and training.
• Royalty income from passive licensing—such as your school selling merchandise with your image but without your active involvement—may be reported on Schedule E, which avoids self-employment tax. If you actively promote the merchandise, it belongs on Schedule C.
• Scholarships and financial aid are generally tax-free if used for tuition, fees, books, and required supplies. Amounts used for other expenses, such as housing or meals, may be taxable.

Additional Tax Considerations for NIL Athletes

Beyond income reporting, NIL earnings can affect several other parts of a student-athlete’s financial picture. Keep these factors in mind:

• Self-Employment Tax: In addition to federal and state income taxes, NIL self-employment earnings are subject to 15.3% self-employment tax for Social Security and Medicare. If you expect to owe $1,000 or more when you file, you’ll likely need to make quarterly estimated tax payments to avoid penalties.
• State Taxes: If you perform NIL activities in multiple states—such as traveling for promotional appearances—you may owe taxes in more than one state. Understanding these obligations before signing deals can help avoid unexpected tax bills.
• Dependency and Financial Aid: If parents plan to claim a student-athlete as a dependent, NIL earnings could change that eligibility. NIL income must also be reported on the FAFSA, which may affect financial aid awards.

Good Records Are Non-Negotiable

Accurate record keeping will make tax time much easier and help protect you if the IRS ever has questions. Best practices include:

• Tracking all payments—cash and non-cash
• Logging the dates and details of services performed
• Saving receipts for deductible expenses
• Keeping business finances separate from personal finances

What to Look for in an Advisor

The right tax advisor can make a big difference in how smoothly you manage NIL earnings. When choosing one, look for:

• Experience with self-employment tax rules and deductions
• Multi-state filing knowledge if your NIL activities take place in more than one state
• Familiarity with college athlete NIL arrangements and how different types of NIL income are taxed
• Guidance on business structures such as LLCs or S-Corporations to help manage risk and optimize taxes if appropriate
• Year-round tax planning to help set aside funds, make estimated payments, and avoid surprises

Meeting with an advisor early—ideally before your first NIL payment—can help you plan for taxes, set up good recordkeeping habits, and maximize available deductions.

Looking Ahead

NIL opportunities bring new financial freedom for student-athletes, but they also come with the responsibility of reporting income, paying taxes, and keeping clear records—just like any small business owner. By understanding the tax rules, staying organized, and working with a knowledgeable advisor, athletes and their families can make the most of NIL earnings while staying in compliance with the law.

Rob Gould-Wetmore is a Senior Accountant at ARB specializing in auditing and financial compliance services for auto dealerships, construction companies, and financial institutions. His experience in sales and use tax helps clients navigate complex or unique situations to streamline regulatory compliance.