Authors: Alexis Kopcienski, Esq., Matthew A. Skinner, Esq., Theresa A. Lyons, Esq., MSW
Name, Image, and Likeness is the newest way student athletes can start making money. The National College Athletics Association (NCAA) used to not allow student-athletes to receive money from outside sources to protect the fairness of the recruiting process. Now with social media apps like TikTok on the rise, and brand deals that can pave a new future for these athletes, the NCAA since July 1, 2021, has allowed student-athletes to benefit from their NIL without risking their NCAA eligibility according to their policy NCAA NIL. While it is an amazing way of making an income as an athlete, there are important financial factors that come into play when earning money, and more specifically, tax implications.
What is NIL Income?
NIL income is any monetary or financial gain in the form of cash or non-cash compensation (like merchandise or gift cards) that benefits a student athlete by using their name, image, and likeness. Payments can be direct cash or salary based, as well as “in kind” payments such as clothing, vehicles, cryptocurrency, etc. All income, cash or “in kind”, from NIL activities is considered taxable income.
Sources of NIL Income
- Content creator/social media influencer
- Brand endorsements
- Sponsorship deals
- Autograph signings and memorabilia
- Promotional appearances
- Marketing brands
- Merchandise
- Personal and promotional appearances
- Exhibitions
- Endorsements
- Gifts
- Giveaways
State and Federal Taxes on NIL Income
Anyone financially benefiting from NIL must keep accurate records of earnings, track expenses, and file taxes appropriately. It is important to understand that everyone’s tax situation is different.
State: Depending on the state, you may owe tax to a state where you earned income from NIL activities. Every state is different but factors that will affect this are the state and the amount of money earned.
Federal: If you earn $400 or more, you will be required to file your income on your federal taxes. The type of forms that will need to be submitted depends on where the money is coming from and if you have an LLC set up. Most athletes are treated as independent contractors because the schools, businesses, and sponsorships they work with will not withhold taxes for athletes. Tax withholding must be done independently, which is different from most jobs the average person has. This means they must report NIL income on their personal tax returns using a 1099 form. 1099s are used over W-2’s because they report various types of income other than wages, salaries, and tips (which are reported on W-2 forms). Athletes may also owe self-employment taxes and estimated quarterly payments if they set up an LLC. Forming an LLC or S-Corporation can provide legal protection, simplify tax management, and create credibility for larger NIL partnerships. LLCs also help athletes claim tax-deductible expenses like gear, travel, legal fees, etc.
Financial Aid: These tax forms will also apply to your Free Application for Federal Student Aid (FAFSA) for college and could potentially reduce eligibility for need based financial aid given by the government. Increased student Adjusted Gross Income (AGI) could lead to a lower Expected Family Contribution (EFC), and therefore, less need-based aid like Pell Grants.
Filing as an individual, setting up an LLC or S corporation, and identifying eligible deductions can all impact your financial status. Since tax season often overlaps with sports seasons, planning ahead is key to avoiding stress or mistakes. Our attorneys can guide athletes and families in the right direction legally and help set up financial entities.
Who We Represent
At Lyons & Associate, P.C., our NIL lawyers proudly represent:
- High school athletes navigating state-specific NIL rules
- Collegiate athletes entering their first deals or expanding into national sponsorships
- Parents and guardians of young athletes seeking trusted legal guidance
- Coaches and advisors who want to support their athletes with professional legal resources
- Athletes in all sports, including football, basketball, baseball, soccer, wrestling, gymnastics, and emerging NCAA sports
We also collaborate with co-counsel in other states to provide support nationwide, while maintaining our strong foundation in New Jersey law.
Contact Our New Jersey NIL Lawyers Today
Whether you have been approached with a deal, want to make sure your eligibility is intact, or are simply trying to understand what NIL means for your future, Lyons & Associates, P.C. is here to help. Call us at 908-829-6959 or contact us online to schedule a free, confidential consultation. We are available to meet with clients in-person at our multiple New Jersey locations, and work with athletes and families throughout the United States.
