NIL Taxation, IRS Guidance, Legislation & Filing

nil tax

This generation has made significant changes to college sports. News about the Name, Image, and Likeness (NIL) interim policy adopted by the National Collegiate Athletic Association (NCAA) has been out in the public. Last July 1, a mixture of new state laws and NCAA rules were taken into effect to give athletes different degrees of new protections and opportunities to make money by selling their NIL rights.

The main intention of this law is to let college and even high school athletes have the ability to promote themselves, without risking their eligibility from being student-athletes.  According to Mark Emmert, NCAA President, “this is an important day for college athletes since they are now able to take advantage of the Name, Image, and Likeness opportunities.” Unarguably, this law will surely change the life of every student-athletes who put so much dedication to play their sports and bring honor to their country. 

With federal NIL law, college athletes are now allowed to profit from their fame. Though NCAA stakeholders still try to strictly limit the involvement of schools and that their employees can arrange endorsements for their athletes. Current laws are significantly less rigorous, attributable to antitrust concerns raised by a recent Supreme Court ruling. 

The NCAA regulations only forbid a school or its staff from directly compensating an athlete for his or her NIL rights. Some states have legislation stating that athletic departments and their personnel may not “cause pay to be directed” to athletes, although the specifics of what is and is not permissible remain unclear.

Many people may be wondering what occurred in the past to have this sort of setup now. As such, let us recall the timeline before the effectiveness of the federal NIL law for athletes:

September 30, 2019, Sen. Nancy Skinner’s legislation forbids colleges from sanctioning athletes who take endorsement compensation while in college. Although it was scheduled to begin in 2023, the NCAA had labeled the measure an “existential danger” to college amateur sports when it was proposed months before.

October 29, 2019, the NCAA’s board of governors unanimously voted that it is finally time to update its name, image, and likeness rules. As a result, the NCAA asked all three divisions to develop guidelines by 2021 that would allow players to earn endorsement money while still being a “collegiate model.”

April 29, 2020, an NCAA-appointed working committee laid out its recommendations for how Division I should amend its regulations, including specifics on the potential and constraints for future athlete arrangements. The Division I Council publicly suggested these modifications in November 2020, with intentions to vote on them in January 2021.

June 12, 2020, Florida also approved the state of law that dramatically reduced the time it would take to design a consistent national solution because it was planned to go into effect on July 1, 2021. 

July 22, 2020,  during a Senate hearing in Washington, D.C., Emmert, the NCAA president, urged Congress for assistance in enacting a federal NIL law. Several senators then asked Emmert and the NCAA to expand the scope of their proposed reforms if they intended to get assistance from Congress.

August 2, 2020, a faction of Pac-12 football players threatened to boycott the season, outlining a set of requests which involved a cut of athletic department money for players. A week later, a similar group of national stars gathered and announced their intention to organize a college football players’ union in the future.

September 24, 2020, Reps. Anthony Gonzalez, R-Ohio, and Emanuel Cleaver, D-Mo., propose a federal bill that would authorize NIL partnerships with some limits in the goal of preventing endorsements from interrupting the recruitment policy. 

December 10, 2021, Sen. Roger Wicker, R-Miss., offered federal legislation that would enable some NIL partnerships as well as provide an antitrust exclusion to insulate the NCAA from some sorts of future litigation.

December 16, 2020, just before the end of 2020, the Supreme Court decided to hear the NCAA’s appeal of a federal judge’s ruling in the Alston v. NCAA antitrust litigation. While not directly linked to NIL regulations, the Supreme Court’s judgment, in this case, may have an influence on how much authority the NCAA has in the future in redefining amateurism. 

December 17, 2020, Senators Richard Blumenthal (D-Conn.) and Cory Booker, D-N.J, presented legislation on the day after asking for a broad revamp of NCAA rules and college sports management.

January 11, 2021, the Division I Council of NCAA delays its vote on NIL rules as they have sited some concerns regarding the possible antitrust implications of altering its regulation. In turn, the NCAA president said he was frustrated and disappointed at the same time because of the indefinite delay. 

February 4, 2021, Rep. Lori Trahan, D-Mass, and Sen. Chris Murphy, D-Conn., propose federal legislation that provides a completely unrestricted market of student-athlete endorsement deals. 

March 31, 2021, the oral arguments in the Alston vs. NCAA antitrust lawsuit have reached the Supreme Court. 

April 1, 2021, Mark Emmert, the NCAA president, had a meeting with three basketball players attempting to raise awareness of the unfair treatment of student-athletes. As such, they are encouraged to use the hashtag #NotNCAAProperty. In line with that, the athletes asked the NCAA to adopt a temporary blanket waiver that would let all players earn money from endorsement deals next school year while waiting for a permanent and solid decision regarding the NIL federal law. 

June 18, 2021, Six conference heads, including the SEC, ACC, and Pac-12 leaders, introduce a new proposal that would make each school responsible for writing their own NIL policies. This proposal came after the Senate hearing in June clearly stated that a federal law was not imminent. 

June 21, 2021, the Supreme Court released an opinion dealing a vital blow to the NCAA’s appeal that it should have special antitrust treatment because of its academic goal. The justice’s ruling clearly stated that the organization’s restriction including on NIL activity could face legal challenges soon. 

June 30, 2021,  The NCAA Board of Directors takes on a temporary regulation change that allows NIL activity, letting schools set their own rules and policy for the things that should be allowed with minimal guidelines. 

July 1, 2021, finally, the first phase of state laws and the new rules of the NCAA go into effect. Student players are now allowed to sign endorsement deals once the clock strikes at midnight. 

Following the effectivity date of NIL, let’s discover more about the benefit it’ll give to the international student-athletes and unveil the NIL taxation, legislation, filing, and guidelines that entail this federal law.

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NIL Legislation

The NCAA with the help of Congress created the federal NIL law for the benefit of the high school and college athletes. While numerous federal options have been introduced, it is more likely that state laws will begin to take place before the nationwide change.

As of writing, there are 28 states with NIL laws going into effect, and there is still more country that is actively pursuing legislation. Below are the states (in alphabetical order) where NIL law is already in place:

  • Alabama. Passed the law on Apr. 2021 and goes into effect on Jul. 1, 2021.
  • Arizona. Passed the law on Mar. 2021and goes into effect on Jul. 23, 2021.
  • Arkansas. Passed the law on Apr. 2021and will be effective on Jan. 1, 2022.
  • California. Passed the law on Sept. 2019 and will be effective on Jan. 1, 2023.
  • Colorado. Passed the law on Mar. 2020 and will be effective on Jan. 1, 2023.
  • Connecticut. Passed the law on June 2021 and goes into effect on Jul. 1, 2021.
  • Florida. Passed the law on Jun. 2020 and goes into effect on Jul. 1, 2021.
  • Georgia.  Passed the law on May 2021 and goes into effect on Jul. 1, 2021.
  • Illinois. Passed the law on Jun. 2021 and goes into effect on Jul. 1, 2021.
  • Kentucky. Passed the law on Jun. 2021 and goes into effect on Jul. 1, 2021.
  • Louisiana. Passed the law on July 2021 and goes into effect: Jul. 1, 2021.
  • Maryland. Passed the law on May 2021and will be effective on Jul. 1, 2023.
  • Michigan. Passed the law on Dec. 2020 and will be effective on Dec. 31, 2022.
  • Mississippi. Passed the law on Apr. 2021 and goes into effect on Jul. 1, 2021.
  • Missouri.  Passed the law on Jul. 2021and goes into effect on Aug. 28, 2021.
  • Montana. Passed the law on Apr. 2021 and will be effective on Jun. 1, 2023.
  • Nebraska. Passed the law on Jul. 2020 and will be effective no later than Jul. 1, 2023. However, schools in this State can implement new policies at any time.
  • Nevada. Passed the law on Jun. 2021 and will be effective on Jan. 1, 2022.
  • New Jersey. Passed the law on Sept. 2020 and will be effective on Sept. 2025.
  • New Mexico. Passed the law on Apr. 2021 and goes into effect on Jul. 1, 2021.
  • North Carolina. Signed the law on Jul. 2021and goes into effect on Jul. 2, 2021.
  • Ohio. Signed the law on Jun. 2021 and goes into effect on Jul. 1, 2021.
  • Oklahoma. Passed the law on May 2021and will be effective on Jul. 1, 2023 However, schools in this State can implement new policy at any time.
  • Oregon. Passed the law on Jun. 2021 and goes into effect on Jul. 1, 2021.
  • Pennsylvania. Passed the law on Jun. 2021 and goes into effect on Jun. 30, 2021.
  • South Carolina. Passed the law on May 2021 and will be effective on Jul. 1, 2022.
  • Tennessee. Passed the law on May 2021and will be effective on Jan. 1, 2022.
  • Texas. Passed the law on June 2021 and goes into effect on July 1, 2021.

Meanwhile, there are still some states with bills actively moving through the legislative process, these include:

  • Massachusetts (2022)
  • New York (2021)
  • Rhode Island (2022).

Ways College-Athletes Are Getting Paid 

The NIL law includes strict regulations preventing athletes from being paid for their performance during a game and using improper incentives that may affect their choice of a particular university; in other words, “pay for play.” 

Before this law goes into effect, NCAA student players who have a considerable number of followers on social media were forced to waive payment from TikTok, Twitch, Youtube, and more.  As such, if they want to continue being an athlete and play their sports, they must forgo any compensation from such online channels.

While NIL law only became effective on the first day of July 2021, many student-athletes are excitedly looking forward to putting their signatures on this life-changing deal for their NIL. When the clock struck midnight on July 1, student-athletes have come rushing in taking advantage of the great opportunity to cash in on their names, image, and likeness.

Here are some of the NCAA athletes who are already getting compensations for their NIL: 

  • Hanna and Haley Cavinder, Fresno State women’s basketball Sisters. 
  • Bo Nix, the Auburn’s Quarterback
  • Hercy Miller, an incoming freshman basketball varsity at Tennessee State
  • Bryce Young, University of Alabama’s quarterback
  • Dontaie Allen, Basketball player at the University of Kentucky

While NIL federal law provides financial opportunities for collegiate athletes, the last thing on their minds is the taxable income and tax liabilities resulting from these deals. Though at this moment there is no specific guidance from the IRS, there are two ways the income from NIL could be treated based on the IRS’s professional athlete guidance; the service-based income and royalty income.  

Service-based income like social media revenue and commercials will be treated as non-passive income or self-employment income. On the other hand, royalty income can either be passive or non-passive depending on the participation level. To qualify for participation, an individual must satisfy one of the seven participation tests to be considered as a participant in the business.

Self-employment Income

If a collegiate athlete qualifies for any of the participation tests, they will be considered as self-employed. As such, the income they earned from the deal will be deducted by 15.3% of self-employment tax on their first $142,000 income, in addition to the federal income taxes for any profit, they get from the NIL deal. 

While taxes take away a significant portion of the athletes’ income from any deals, self-employment income allows student players to claim expenses for the year on top of the income from their personal business. 

Passive Income 

On the other hand, when an athlete doesn’t qualify for any of the participation tests, the deal will be treated as passive income. As such, these questions must be answered:

  • Is the student player claimed as a qualifying dependent on another individual’s tax return?
  • Is the amount of passive revenue from the deal and personally above $2,200?

If these questions are answerable by yes, the athlete’s passive income will be subject to “kiddie tax” according to IRC. This type of tax is calculated on passive income over $2,200 attributed to the child at the guardian’s or parent’s tax rate. For example, if a dependent college-pro player makes $12,000 of passive income within the year, $9,800 of their earnings would be taxed as if the revenue was the guardian or parent claiming the student-athlete. ($12,000-$2,200=$9,800)

The main intention of kiddie tax is to prevent the athlete’s guardian from removing passive earnings from their personal return and placing it on their child’s return to have a lower overall income tax rate by spreading out the income on their children’s revenue. However, since student-athlete has now the ability to earn a significant amount of money as passive income from the NIL interim policy, there might be a new ruling by the IRS or refreshing of the IRC to show guidance for these changes. 

What Taxes are Payable?

With NIL federal law, student-athletes are now capable of making money from their name, image, and likeness. Whether through personal business endeavors, autograph signings, or promotional deals, all collegiate athletes are now earning compensations. With this opportunity, however, comes a financial and tax impact. 

Student-players should know that they need to file income taxes from their NIL profit, and in some instances, they have to turn over a particular percentage of their earnings to Uncle Sam and state treasuries.  Hence, college athletes are obliged to familiarize tax process, which can be a bit frustrating for old and young alike.

Like other taxpayers, college athletes should be cautious about accompanying complexities. As such, NIL compensation could affect Pell Grant eligibility and financial aid; it’s only among other tax implications student-athletes will face out of this new rule.

To begin with, businesses that sign student players to NIL deals will likely treat those athletes as an independent contractors. This arrangement is commonly applied in athlete endorsement deals. Why? Partly because the endorser is often a staff of a pro team, which has vital control over the player’s activities and time.  

An endorsement deal is more of a part-time with specific obligations and doesn’t constitute full-time work. As such, an independent contractor will only participate in promotional events and autograph shows, just like the use of pro players NIL for products and services. 

Meanwhile, tax deductions of employees and independent contractors vary widely. The company doesn’t withhold income taxes, Medicare, and Social Security for independent contractors, unlike its employees. As such, athletes that are signed as a primary contractors will receive a pretax fee or pretax payment, so the amount becomes bigger than it is after paying taxes. Plus, they will also fill-out Form 1099-misc rather than W-2. 

In generating tax consequences for student-athletes, here are some of the factors to consider:

  • When the athlete is a resident of the state where they attend college;
  • When the athlete has not yet earned other income; and 
  • When the athletes an independent contractors or self-employed. 

As more NCAA college athletes are paid for their NIL, you can expect this to be an IRS audit trigger.

Now, let’s have a better look at what taxes will college-athletes have to pay while making money out of their NIL:

Federal Tax

When a pro-student player earns over $12,550 will likely pay federal tax. However, there’s a standard deduction of $12,550 if you’re still single. That said, if your total revenue is below $12,550, you won’t have to pay federal taxes. 

State Tax

Regardless of what state a student-athlete earns their income, they are subjected to pay state tax. On top of that, the pro player also owes taxes in the state they came from and where their parents live, depending on the status of their residency. 

Dates for Filing Tax Return by Student-Athlete 

College athletes who earn income from the NIL deal will need to file a tax return or extension by the 15th day of April 2022. Moreover, if they earned an income in 2020, they will have to pay quarterly estimated taxes for any compensations and payments they receive from NIL in 2021. With that said, student-athletes should pay their tax as soon as the 15th day of September. Don’t forget, the IRS generally has three years to audit your return (and longer if they suspect fraud).

NCAA college athletes are now allowed to get paid for their Name, Image, and Likeness (NIL). Is college athlete sponsorship income taxable?


Is NIL Money Taxable?

Yes. Since student-athletes may earn through personal business endeavors, autograph signing, or an endorsement deal, they are required to file income taxes from their NIL profit, and in some instances, they have to turn over a particular percentage of their earnings to Uncle Sam and state treasuries.

What is NIL Law? 

NIL law is a mixture of new state laws and NCAA rules that were taken into effect allowing athletes at every level to monetize their success with the use of their name, image, and likeness. With this, athletes are protected with new rules and policies regarding the compensations they gain from their fame, performance, and endorsements.

Do Student Athletes Pay Taxes? 

When student-athletes sign life-changing deals for their NIL, they are required to pay state income tax, depending on their earnings. As such, when a business signs college athletes to NIL deals, they will likely treat those athletes as an independent contractors. Once these athletes earn money from participating in promotional events and the likes, they have to know tax implications and processes, just like other taxpayers.   

Do College Athletes Pay Taxes on Stipends?

A fellowship/scholarship utilized for expenses other than qualified expenses is taxable income. Generally, taxable scholarships are referred to as stipends. Examples of stipends are payments that can be used as incidental and living expenses such as board and lodging, personal computers, non-required books, and travel. Hence, college athletes who receive stipends are required to pay taxes.  

Is NIL Income Considered Self Employment Income?

When a student-athlete qualifies for any participation test, they are treated as self-employed. In this case, their earnings from NIL deals are considered as self-employment income and are required to pay self-employment tax on top ot the federal income taxes for any money earned from the deals. 


The NIL federal law has opened great opportunities towards life-changing deals for student-athletes to earn income through their names, image, and likeness. However, with this opportunity comes a financial and tax impact that may also change the life of the college pro players. 

With their income and earnings from an endorsement deal, autograph signings, and social media appearances, they are now required to file income taxes from their NIL profit, and in some cases, they have to turn over a particular percentage of their income to the state treasuries. Thus, to acquire financial literacy, NCAA college athletes are advised to learn more about their finances and get familiar with the tax process, filings, and other necessary guidelines.

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