A 19-year-old college volleyball player posts a sponsored TikTok for a protein powder brand and gets paid $1,200. A backup quarterback signs autographs at a card show for $3,000 cash. A gymnast licenses her name to a video game for a four-figure royalty check. None of these athletes has ever run a business, filed a Schedule C, or made an estimated tax payment in their life — and now they all owe the IRS money on income that didn't exist as a legal category before 2021.
Name, Image, and Likeness (NIL) income has turned hundreds of thousands of college athletes into small business owners overnight, whether they realize it or not. And in 2026, the landscape got even more complicated: on top of individual endorsement deals, many athletes now also receive direct revenue-sharing payments from their schools under the House v. NCAA settlement. Two different income streams, two different tax treatments, and one very confused 19-year-old trying to figure out why a chunk of their sponsorship check needs to go to the government.
Here's what college athletes — and the parents helping them navigate this — actually need to know.
NIL Income Is Self-Employment Income, Full Stop
The single most important thing to understand: the IRS treats NIL earnings from brand deals, sponsorships, autograph signings, and social media promotions as self-employment income, not a paycheck. That classification triggers a completely different set of rules than the ones that apply to a typical part-time job.
When you're an employee, your employer withholds income tax, Social Security, and Medicare from every paycheck automatically. You barely think about it. When you're self-employed — which is what an athlete doing NIL deals through a personal brand or LLC effectively is — nobody withholds anything. You get the full amount up front, and it's entirely on you to set aside money and pay the IRS yourself.
This distinction matters because NIL income is subject to two layers of tax:
- Ordinary federal (and often state) income tax, based on your tax bracket
- Self-employment tax of 15.3% — 12.4% for Social Security and 2.9% for Medicare — which covers the employer-side contributions that a traditional job would otherwise pay on your behalf
That 15.3% catches almost everyone off guard. An athlete who earns $10,000 in NIL deals isn't just paying income tax on that $10,000 — they're also handing over roughly $1,400 in self-employment tax before income tax is even calculated, unless they've properly deducted business expenses to shrink that number first.
Do You Even Owe Taxes? Yes — Probably Sooner Than You Think
A common misconception is that NIL income only counts if a company sends you a Form 1099. That's false. If your net earnings from NIL activities exceed $400 in a year, you're required to file a tax return and pay self-employment tax — regardless of whether anyone ever generates a 1099 for you.
Starting with the 2026 tax year, the reporting threshold that triggers a company's obligation to send you a Form 1099-NEC or 1099-MISC rose to $2,000, up from the longstanding $600 threshold. That's a relief for smaller, one-off deals in terms of paperwork — but it's a trap for the unwary: the $2,000 threshold only determines whether the payer has to file a form. It does nothing to change your obligation to report and pay tax on every dollar of NIL income, even a $300 collectible signing that generates no paperwork at all.
Practical takeaway: track every payment yourself, in writing, the moment you receive it. Don't wait for a 1099 to tell you what you earned, because for a growing share of smaller deals, one will never arrive.
Quarterly Estimated Payments: The Part Nobody Warns You About
Because no one withholds tax from NIL payments, the IRS expects you to pay as you go throughout the year via quarterly estimated tax payments (Form 1040-ES), rather than settling everything in one lump sum the following April. For 2026, those payments are generally due in mid-April, mid-June, mid-September, and mid-January of the following year.
Skipping this step doesn't just delay the bill — it can generate underpayment penalties on top of the tax itself. For an 18-year-old who just deposited their first $5,000 NIL check and spent some of it on a car payment, discovering in April that they owe several hundred dollars in penalties on top of taxes is a brutal lesson in cash flow management.
The fix is simple in concept, harder in practice: as soon as NIL money hits your account, immediately move a percentage — many tax professionals suggest 25–30% for combined federal, state, and self-employment tax — into a separate savings account that you don't touch. Treat it as money that was never really yours.
Revenue-Sharing Payments Add a Second, Different Tax Layer
Since the House v. NCAA settlement took effect, many Division I schools now pay athletes directly out of a revenue-sharing pool — capped at roughly $20.5 million per school for the 2025–2026 academic year and rising annually. This is separate from third-party NIL deals with brands, and it may come with a different tax treatment depending on how the school structures the payment (as compensation, as a stipend, or through a school-affiliated entity).
The practical implication for athletes: you may now be juggling two income streams with two different reporting mechanisms — a school revenue-share payment and a portfolio of brand deals brokered through an agent or NIL collective — each of which needs to be tracked separately for tax purposes. Athletes with deals above certain thresholds must also report them through the NCAA's NIL Go compliance platform within a few business days, which is a compliance requirement layered on top of, not instead of, the tax reporting requirement.
What You Can Actually Deduct
The upside of being treated as a business is that you also get to deduct legitimate business expenses against your NIL income, which lowers both your income tax and your self-employment tax. Commonly deductible costs include:
- Agent and marketing representation fees — if someone takes a cut of your deals to negotiate them, that cut is a business expense, not income you ever really had
- Travel for appearances, signings, or content shoots — mileage, flights, and lodging tied directly to earning NIL income
- Content creation costs — camera equipment, editing software, professional photography
- Training and equipment used specifically to maintain the skills that generate your NIL value
- Phone, internet, and a portion of home office costs if you manage deals from home
- Professional services — your CPA or tax preparer's fee is itself deductible
These deductions get reported on Schedule C alongside your gross NIL income, and only the net profit is what gets hit with self-employment tax. An athlete who earned $8,000 but spent $1,500 on a personal trainer, travel, and an agent fee only owes tax on $6,500 of net income — a meaningful difference that most 19-year-olds have no idea they're entitled to claim.
The Kiddie Tax Myth (And the State Tax Trap That's Real)
A lot of NIL guidance online warns athletes about the "kiddie tax" — a rule that taxes a dependent child's unearned income (think dividends or trust distributions) at their parent's higher marginal rate. Good news: NIL income is earned income from providing a service, so the kiddie tax generally does not apply to it. Don't let that scare you away from a deal.
What's real, and far more likely to bite you, is multi-state tax exposure. If you sign an autograph in one state, film a commercial in another, and attend your university in a third, you may owe state income tax in each state where you actually performed NIL-related work — not just your home state. This is exactly the kind of situation where good recordkeeping (dates, locations, and amounts for every NIL activity) saves you from a nasty surprise, or from overpaying because you didn't file for a credit you were owed.
Bookkeeping Habits That Prevent a Tax-Season Disaster
The athletes who come out of tax season unscathed are the ones who treated their NIL income like a business from day one, rather than a windfall to spend:
- Open a separate bank account for NIL income and expenses — never comingle it with everyday spending money
- Log every payment the day it arrives, including the payer, amount, date, and what it was for — don't rely on a 1099 that may never come
- Save every receipt for expenses you plan to deduct, even small ones like a $40 ring light for content shoots
- Set aside 25–30% immediately, before you spend a dollar of any NIL payment
- Track where you performed the work, not just where you got paid, to handle multi-state filing correctly
Clear, contemporaneous records are the difference between a straightforward Schedule C filing and a scramble to reconstruct a year's worth of Venmo payments and cash signings from memory in March.
Keep Your Finances Organized from Day One
Whether you're a student-athlete navigating your first NIL deal or a parent helping manage the paperwork, the underlying challenge is the same one every small business owner faces: keeping accurate, auditable records of what came in, what went out, and why. Beancount.io offers plain-text accounting that gives you complete transparency and control over your financial data — no black boxes, no vendor lock-in. Get started for free and see why developers and finance professionals are switching to plain-text accounting.