As college athletes gain more opportunities to earn income, managing taxes and financial responsibilities becomes essential. From endorsements to sponsorships, understanding how income is taxed and what financial obligations come with it can prevent unexpected challenges. Navigating tax laws, making informed financial decisions, and planning for the future are all crucial aspects of financial success. Without proper guidance, athletes may face unnecessary penalties or miss out on opportunities to maximize their earnings. This guide provides a comprehensive overview of the key financial and tax considerations every college athlete should be aware of.

Understanding Tax Obligations for College Athletes

With college athletes now earning income from Name, Image, and Likeness (NIL) deals, endorsements, and other business ventures, tax obligations have become a critical part of financial planning. The IRS considers most NIL-related earnings as self-employment income, meaning athletes must report their earnings and pay taxes accordingly.

Do College Athletes Have to Pay Taxes?

Yes, if you earn income through NIL deals, sponsorships, or business-related activities, you are legally required to report and pay taxes on that income. Most NIL earnings are classified as self-employment income, meaning college athletes are treated like independent contractors for tax purposes.

Key Point: Even if you do not receive a tax form (such as a 1099-NEC), you must still report and pay taxes on all NIL-related income.

Why Are College Athletes Considered Self-Employed?

Unlike traditional employees who receive a salary with automatic tax withholdings, college athletes earning NIL income are classified as self-employed individuals because:

They negotiate contracts directly with brands and sponsors.
They receive payments as independent contractors.
They manage their own income and expenses without employer oversight.

What Types of Income Are Taxable?

Not all money received by a college athlete is taxable. Some earnings, such as NIL payments, are fully taxable, while certain scholarships and stipends may be exempt.

Taxable Income (Must Report & Pay Taxes)

If you earn money as a college athlete, it is likely taxable under self-employment or personal income tax laws. This includes:

NIL Endorsements & Sponsorships – Payments from brands like Nike, Adidas, or Gatorade.
Social Media Monetization – Income from platforms like TikTok, YouTube, and Instagram, including ad revenue and creator funds.
Brand Deals & Affiliate Marketing – Earnings from affiliate links, referral codes, or promotional campaigns.
Merchandise Sales – Income from selling personalized jerseys, autographs, or branded apparel.
Appearance Fees & Public Speaking – Payments for attending events, hosting sports camps, or making guest appearances.
Training Services & Private Coaching – Earnings from offering sports training or skill development services.

Example: If an athlete earns $10,000 from Instagram sponsorships, this must be reported as income, even if the brand does not send them a tax form.

Non-Taxable Income (No Taxes Owed)

Certain types of income or financial support provided to student-athletes are not subject to taxation, including:

Athletic Scholarships for Tuition & Fees – Scholarships used for tuition, books, and required fees are generally tax-free.
Per Diems & Stipends Paid by Schools – Some universities provide meal stipends, travel allowances, or educational assistance, which may be non-taxable if classified as educational support.

Exception: If a scholarship covers room, board, or personal expenses, the amount may be taxable and must be reported.

What Tax Forms Will College Athletes Receive?

Since college athletes earning NIL income are classified as self-employed, they may receive various tax forms from brands, sponsors, and payment platforms. These forms help athletes and the IRS track earnings and tax obligations.

Common Tax Forms for College Athletes

Form 1099-NEC

Who issues it? Brands, companies, and sponsors.
When do you receive it? If a company pays you $600 or more for NIL deals, endorsements, or independent work.
Why is it important? Reports self-employment income, which must be declared when filing taxes.

Form 1099-K

Who issues it? Payment processors like PayPal, Venmo, Cash App, Stripe.
When do you receive it? If you receive over $600 in payments through third-party platforms.
Why is it important? Tracks business transactions from digital payment services.

Form W-2

Who issues it? Employers (rare for college athletes).
When do you receive it? If you are hired as an employee of a company (uncommon for NIL athletes).
Why is it important? Reports wages and automatic tax withholdings.

Schedule C (Form 1040)

Who needs to file it? Any self-employed college athlete.
Why is it important? Used to report business income and deduct expenses related to NIL activities.

Tip: Even if you do not receive a 1099-NEC or 1099-K, you are still required to report all NIL-related income on your tax return.

Self-Employment Tax and Estimated Payments

College athletes earning Name, Image, and Likeness (NIL) income are generally classified as self-employed, which means they must handle their own tax payments. Unlike traditional employees, whose taxes are automatically withheld from their paychecks, self-employed athletes must calculate and pay their own taxes on NIL earnings.

Self-Employment Tax: What You Owe

Self-employment tax is a mandatory tax on NIL earnings that covers Social Security and Medicare contributions. Because athletes earning NIL money are not classified as employees, they are responsible for paying both the employer and employee portions of these taxes.

Breakdown of Self-Employment Tax (FICA Taxes):

12.4% for Social Security (on earnings up to the annual limit)
2.9% for Medicare (on all net earnings)
Total: 15.3% on NIL earnings exceeding $400 per year

Example: If a college athlete earns $50,000 from NIL deals, they would owe:

$7,650 in self-employment tax (15.3% of $50,000)
Plus federal and state income taxes on top of this amount.

Why Do College Athletes Need to Pay Estimated Taxes?

Unlike employees whose taxes are deducted from each paycheck, self-employed individuals—including college athletes—must estimate and pay their own taxes throughout the year if they expect to owe $1,000 or more in taxes.

Key Rule: If an athlete does not make estimated payments and owes over $1,000 at tax time, they may face IRS penalties and interest charges.

Quarterly Estimated Tax Payment Deadlines

College athletes must pay taxes in four quarterly installments based on their NIL earnings:

Quarterly Estimated Tax Payment Deadlines

College athletes must pay taxes in four quarterly installments based on their NIL earnings:

Q1	January 1 – March 31	April 15
Q2	April 1 – May 31	June 15
Q3	June 1 – August 31	September 15
Q4	September 1 – December 31	January 15 (of the following year)

How to Calculate and Submit Estimated Taxes

To determine how much to pay each quarter, athletes can use:

IRS Form 1040-ES (Estimated Tax for Individuals)
Online IRS payment tools (Direct Pay, EFTPS)
Tax software or a CPA to help with calculations

Tip: A general rule is to set aside 25-30% of NIL earnings for taxes and make timely estimated payments.

Deductions & Tax Breaks for College Athletes

College athletes earning can take advantage of tax deductions to lower their taxable income and maximize earnings. These deductions apply to business-related expenses that are necessary for NIL activities.

What Expenses Can Athletes Deduct?

Tax deductions reduce taxable income, meaning athletes only pay taxes on the remaining income after deducting eligible expenses. For example, if an athlete earns $50,000 from NIL deals and deducts $10,000 in eligible expenses, they only owe taxes on $40,000 instead of the full amount.

Training & Coaching Costs

Gym memberships and fitness facilities
Personal trainers, sports coaches, and strength training programs
Recovery and rehabilitation expenses (physical therapy, massage therapy, etc.)

Sports Equipment & Apparel

Shoes, uniforms, and sports gear used for competitions or NIL promotions
Special equipment required for training or endorsements

Travel Expenses

Flights, hotels, and transportation for NIL-related events, appearances, and sponsorship obligations
Meals and lodging during sponsored competitions or endorsement shoots

Marketing & Branding

Website development, maintenance, and domain hosting fees
Social media advertising and promotions
Professional photography and videography for brand deals

Legal & Financial Fees

Hiring a tax professional, accountant, or financial advisor
Contract review fees for NIL agreements and sponsorship deals
Legal services for trademarks and NIL-related disputes

Should College Athletes Set Up an LLC?

A Limited Liability Company (LLC) is a business structure that can provide tax benefits, financial protection, and greater control over NIL earnings. While not required, forming an LLC for NIL activities may be beneficial for athletes earning significant income.

Benefits of an LLC for College Athletes

Keeps NIL income and expenses organized and separate from personal funds
Helps with tax deductions and bookkeeping
Some business expenses (such as home office deductions, insurance, and professional fees) may be easier to deduct under an LLC
Protects personal assets (bank accounts, property, etc.) from lawsuits or business-related liabilities

Tip: If NIL income exceeds $100,000 annually, consider consulting a tax professional about whether an LLC or S-Corporation (S-Corp) status offers better tax advantages.

State & Federal Tax Responsibilities for College Athletes

While federal taxes apply uniformly, state tax obligations depend on where athletes live and earn NIL income. Many college athletes must file multiple state tax returns if they receive payments from brands or businesses based in different states.

Do College Athletes Pay State Taxes?

Yes, college athletes must pay state income taxes in:

Their home state (if it has income tax).
Any state where they earn NIL money (if applicable).

State Tax Considerations

No-Income-Tax States: Athletes living in Florida, Texas, Nevada, Tennessee, Washington, and others do not pay state income tax on NIL earnings.
High-Tax States: States like California (up to 13.3%) and New York (up to 10.9%) impose significant state income taxes on NIL earnings.
Multi-State Taxation: If an athlete earns NIL income in multiple states, they may need to file multiple state tax returns and pay taxes in each state where income was generated.

Example: If you live in Texas (0% state tax) but receive NIL payments from a California-based brand (13% tax rate), you may owe taxes in California even though Texas has no state income tax.

When Do Athletes Need to File in Multiple States?

Appear in endorsement events in another state.
College athletes must file state tax returns in multiple states if they: Sign NIL contracts with companies located in different states.
Operate an LLC in one state but live in another.

How to Handle Multi-State Taxation

Avoid Double Taxation – Some states offer credits for taxes paid to other states to prevent double taxation.
Understand Residency Rules – Some states tax all worldwide income if an athlete is considered a resident.
Consult a Tax Professional – Filing multiple state returns can be complex, and a CPA can ensure compliance while maximizing deductions.

Tip: Keep detailed records of where NIL income is earned to determine which states require tax filings.

Managing taxes and financial responsibilities is just as important as training for peak performance. As college athletes navigate the world of NIL earnings, understanding tax obligations and smart money management can prevent costly mistakes and set the stage for long-term financial security. With the right approach, athletes can keep more of their hard-earned income, stay compliant, and build a strong foundation for future success—both on and off the field.

From NIL Deals to Tax Bills: A College Athlete’s Guide to Financial Success