Name, Image, and Likeness (NIL) opportunities have changed the financial landscape for college athletes. From brand endorsements to social media partnerships and revenue-sharing arrangements, student-athletes now have legitimate earning power while competing in collegiate athletics. But with that opportunity comes responsibility. Whether a student-athlete is earning income from brand deals, social media promotions, autograph signings, camps, or appearances, the Internal Revenue Service (IRS) generally expects those earnings to be reported, and all it takes is one small mistake for the IRS to start investigating a college athlete and their income.
NIL Income Is Taxable, Even If You’re Still a Student
The IRS does not treat NIL earnings as “extra money” or student benefits. In most cases, compensation received through NIL activities is classified as self-employment income.
Under this IRS definition:
- Student-athletes must report NIL income on their tax return if they made at least $400 from NIL self-employment activities, or if their total income exceeds the applicable standard deduction.
- Student-athletes who earn $600 or more from a single source may receive a Form 1099, rather than a W-2.
- Taxes are not automatically withheld from payments.
Whether a student-athlete earns $500 or $500,000, NIL compensation is generally subject to federal taxation and, depending on the athlete’s residence and where the income is earned, may also be subject to state income taxes.
NIL Earnings May Trigger Self-Employment Taxes
Because NIL compensation is commonly paid to athletes as independent contractor income, student-athletes are often responsible for paying several types of taxes, including:
- Federal income tax
- State income tax (if applicable)
- Self-employment tax (Social Security and Medicare)
Unlike traditional employment, NIL payments typically do not include automatic tax withholding. As a result, athletes should plan ahead and set aside a portion of their earnings throughout the year. Failing to do so may result in significant tax liability when filing in April.
Multi-State Tax Issues Can Complicate Matters
NIL opportunities often extend beyond an athlete’s home state. Endorsement deals, promotional appearances, and brand partnerships can create tax obligations in multiple jurisdictions.
Here at The Harris Law Firm, our lawyers have seen similar issues arise in professional sports. For example, a former client who served as a kicker for a team in the NFL had to allocate portions of his income to several states because NFL players are taxed based on “duty days” in states where games are played. When he kicked field goals in road games in states such as California or Arizona, those states were able to tax the income associated with those performances. As a result, he was required to file multiple state tax returns even though he only played for one team.
While NIL compensation works differently from professional salaries, the principle is similar. Student-athletes who travel for brand appearances, participate in promotional events, or perform work tied to businesses in other states may also face multi-state tax obligations.
At the same time, some states are beginning to change their tax laws to make NIL earnings more attractive to athletes. Lawmakers in Mississippi recently passed House Bill 4014 (viewable as a PDF file here) in the state House, which would make all NIL income tax-free for college athletes if it ultimately becomes law.
Together, these developments highlight an important reality: NIL earnings are not just about brand deals and endorsements; they also involve navigating an increasingly complex tax environment that varies by state.
Should a Student-Athlete Form an LLC?
Some student-athletes consider forming a limited liability company (LLC) to manage their NIL activities. While an LLC does not automatically reduce taxes, it can be a useful structure for organization, governance, and financial tracking.
Operating NIL activities through an LLC can make it easier to track income and expenses, maintain organized records, and demonstrate proper accounting practices if questions arise during a tax review or audit.
Additionally, some other benefits of forming an LLC may include:
- Liability protection for certain business-related activities
- Professional branding when contracting with companies and sponsors
- Structured accounting and recordkeeping for NIL income and expenses
- Clear separation of finances, which helps avoid commingling personal and business funds
- Improved audit readiness, because transactions are documented through a dedicated business account
For student-athletes generating significant NIL income, forming an entity may help create professional financial systems early in their careers. But the decision should be evaluated carefully and with a legal professional who can weigh factors such as income level, risk exposure, and long-term career goals.
Compliance Extends Beyond the IRS
Tax compliance is only one piece of the NIL landscape. Student-athletes must also ensure their NIL activities comply with applicable rules and policies.
Different policies that can come up in such cases include:
- Institutional policies
- Conference regulations
- State NIL laws
- NCAA guidelines
Failure to properly structure or disclose NIL agreements may create eligibility risks or compliance issues. Careful documentation and proper legal review can help protect both an athlete’s eligibility and long-term financial interests.
Deductible Business Expenses May Reduce Your Tax Liability
NIL income is treated like business income, which means legitimate business expenses may be deductible.
Common deductible expenses may include:
- Marketing and branding costs
- Travel related to appearances, events, or meetings
- Training expenses directly related to NIL obligations
To qualify, expenses must be ordinary and necessary for the athlete’s NIL-related business activities. Good recordkeeping is a must. Save receipts. Track payments. Separate business and personal expenses whenever possible.
NIL Is a Business, So Treat It Like One & Get Legal Guidance
The NIL era has created unprecedented opportunities for student-athletes to monetize their name, image, and likeness. However, once an athlete begins generating NIL income, those activities are often best viewed and managed as a business venture.
Any college athlete who wants to make money through NIL should:
- Track income
- Plan for tax obligations
- Make estimated tax payments when required
- Maintain records of deductible expenses
- Check that endorsement and partnership agreements are properly structured
However, many student-athletes don’t have the time to navigate the legal details of NIL deals, endorsement contracts, tax considerations, or business entity formation on their own. That’s why there is one more thing that every college athlete with a NIL deal or prospective NIL agreement should do: talk to an attorney.
The Harris Law Firm is proud to provide legal guidance designed to help student-athletes protect their eligibility, manage risk, and build a foundation for long-term financial success, both on and off the field. If you are a college athlete and want to take charge of your brand and start making money based on your name, image, and likeness, don’t get too far ahead in the process without first talking to us.
Our sports lawyers and NIL attorneys are available to help college athletes nationwide, so you can use our counsel, regardless of where you live or play. Call (303) 622-5502 and get an initial consultationto learn more.
About the Authors
Machia Mullens is a third-year law student at the University of Colorado Law School with a focus on sports law and athlete advocacy. Drawing on her experience as a former Division I student-athlete, she has worked on NIL, revenue sharing, and compliance matters through law firms, CU Athletics, and the CU Law NIL Practicum. She currently serves as a law clerk at The Harris Law Firm and will join the firm full-time as a sports attorney after graduation.
Steve Cizik is a Partner at The Harris Law Firm and leads the firm’s Tax Division, while also overseeing its Estate, Life, and Legacy Divisions. A graduate of Syracuse University College of Law and UC Boulder, Steve is widely regarded as one of the region’s most respected tax attorneys.
With nearly 20 years of experience, Steve has represented hundreds of individuals and businesses in complex tax matters, litigated high-stakes cases against large Denver and national firms, represented Fortune 100 clients, and saved clients millions of dollars in tax liabilities. His deep technical knowledge, strategic insight, and practical problem-solving approach make him a trusted authority on tax issues arising in divorce.
