Overview: What is NIL?

Name, Image, and Likeness (NIL) rules — which went into effect in July 2021 — fundamentally changed college athletics by allowing student athletes to earn income tied to their personal brand. Endorsement deals, social media sponsorships, autograph signings, athletic camps, podcast appearances, and licensing agreements are all examples of qualifying NIL activity.

While media coverage tends to focus on seven-figure deals at major programs, NIL opportunities exist at all levels of college athletics — and even at many high schools, depending on the state. This means financial considerations that once applied only to professional athletes now arrive much earlier in life, often catching families unprepared.

Key Principle
NIL income is real income — it is taxable, it may affect financial aid, and it comes with record-keeping and filing obligations from day one, regardless of the amount.

This white paper is designed to equip parents and athletes with a clear framework: what NIL means financially, what the IRS requires, and what practical steps to take before, during, and after earning NIL income.
 

For Parents

As a parent, your role in NIL is primarily one of preparation and guardrails — not management or monetization. The best thing you can do is help your student athlete approach earnings with a foundational understanding of tax responsibilities, financial organization, and good decision-making habits.

Key Numbers to Know

Parent Action Checklist

• Open a dedicated checking account exclusively for NIL income and expenses
• Track all income received — including barter, product compensation, and gifts of value
• Set aside 25–30% of gross earnings immediately for federal and state taxes
• Review all contracts before signing — look for exclusivity clauses, term lengths, and image usage rights
• Evaluate how NIL earnings may affect the student’s dependency status on your tax return
• Understand your state’s specific NIL rules, as they vary significantly
• Consult a CPA before the first deal is signed, not after tax season

For Athletes

As a student athlete, NIL income is one of the first times you’re operating as an economic entity in your own right. Whether you’re earning a few hundred dollars for a local deal or significantly more, the financial habits you build now will compound long after your playing career ends.

Six Steps Every NIL Athlete Should Take

Step 1. Get an EIN (Employer Identification Number)
Even as a sole proprietor, obtaining an EIN from the IRS separates your NIL activities from your personal SSN. It’s free and takes minutes at IRS.gov.

Step 2. Collect and file every 1099-NEC

Brands paying you $600 or more are required to issue a Form 1099-NEC. Keep records even for payments below that threshold — all income is taxable regardless of whether a 1099 is issued.

Step 3. Track deductible business expenses

Expenses directly related to your NIL work — equipment, travel for appearances, professional photography, agent fees — may be deductible on Schedule C. Keep receipts and document the business purpose.

Step 4. Pay quarterly estimated taxes

Use IRS Form 1040-ES to calculate and pay estimated taxes each quarter. Deadlines are typically April 15, June 15, September 15, and January 15.

Step 5. Consider a Roth IRA

If you have earned NIL income, you may be eligible to contribute to a Roth IRA — up to the lesser of your earned income or the annual contribution limit. Starting early creates powerful long-term tax-free growth.

Step 6. Protect your brand in contracts

Understand exclusivity terms, usage rights, and what happens if you transfer schools. Some contracts have provisions that could conflict with future opportunities or scholarship conditions.

Things to Consider

Beyond the immediate tax mechanics, NIL creates a broader set of financial and personal considerations that families should think through carefully.

A. Dependency Status and Filing Requirements

If a student earns significant NIL income, they may be required to file their own return — and may no longer qualify as a dependent on their parents’ return. This affects the family’s overall tax picture and any education credits.

B. Business Entity Structure

For athletes earning substantial and ongoing NIL income, forming an LLC may provide liability protection and potential tax planning flexibility. This should be evaluated with a CPA — entity formation has costs and obligations that may not justify themselves for modest income.

C. Collective and Revenue-Sharing Arrangements

Booster collectives and the emerging direct revenue-sharing models between universities and athletes add further complexity. These arrangements may be structured differently for tax purposes and warrant careful review.

D. Long-Term Financial Habits

NIL income peaks during a relatively brief window. Using this period to establish an emergency fund, begin investing, and avoid lifestyle inflation builds a foundation that outlasts the athletic career.

E. Social Media and Public Persona

Brand relationships create a public record. Posts, endorsements, and associations made during college can affect future employment, professional licensure, and personal reputation. Think beyond the immediate payment.

IRS References to Navigate

The IRS does not have an NIL-specific publication, but the following forms, schedules, and publications govern how NIL income is reported and taxed. Understanding which documents apply is the first step toward compliance.

Schedule C   Profit or Loss from Business (Sole Proprietorship)
The primary form for reporting NIL income and deducting associated business expenses. Filed with your Form 1040. Net profit from Schedule C is subject to both income tax and self-employment tax.

Schedule SE   Self-Employment Tax
Used to calculate the 15.3% self-employment tax (Social Security + Medicare) on net self-employment income above $400. Required whenever Schedule C net income exceeds this threshold.

Form 1099-NEC   Nonemployee Compensation
Issued by payers who compensate an athlete $600 or more in a calendar year. Athletes should receive this by January 31 of the following year. Income is taxable even if no 1099-NEC is issued.

Form 1040-ES   Estimated Tax for Individuals
Used to calculate and pay quarterly estimated taxes. Generally required when you expect to owe $1,000 or more in federal taxes for the year. Underpayment can result in an IRS penalty.

Publication 334   Tax Guide for Small Business
IRS guidance covering sole proprietor obligations, including recordkeeping, business deductions, and self-employment tax rules. Directly applicable to athletes operating as sole proprietors under NIL.

Publication 505   Tax Withholding and Estimated Tax
Explains how to calculate estimated tax payments and avoid underpayment penalties. Essential for any athlete with significant NIL income who has no employer withholding taxes on their behalf.

Form SS-4   Application for Employer Identification Number (EIN)
Used to apply for an EIN, which separates NIL business activity from the athlete’s personal SSN. Available free at IRS.gov — the online application takes approximately 15 minutes.

IRC §162   Trade or Business Expenses
The Internal Revenue Code section governing deductibility of “ordinary and necessary” business expenses. The standard applied to NIL-related deductions — expenses must be common in the industry and helpful for the business.

Ready to navigate NIL with confidence?
Our CPAs and wealth advisors at Cordell, Neher & Company work with student athletes and their families to build a tax-smart foundation from the very first deal. 

Disclaimer: This white paper is provided for educational purposes only and does not constitute tax, legal, or financial advice. Individual circumstances vary. Consult a qualified CPA or financial advisor before making decisions based on this content. Cordell, Neher & Company, PLLC.

This information is based on information deemed to be factual and reliable.