What Is NIL (Name, Image & Likeness)
The NCAA’s NIL policy allows students to be compensated for the use of their name, image or likeness. This rule means college athletes can receive endorsement deals and partnerships, make money and start branding themselves before their professional career starts.
How Can Athletes Use NIL To Make Money?
A college athlete can make money by licensing their name, image or likeness. These activities might include personal businesses, social media, promotional appearances, autographs or any other activity. Social media and brand endorsement deals are a the popular revenue source for college athletes.
Athletes are already making thousands of dollars per semester from these endorsements with some athletes making much more.
Are NIL Deals Taxable?
College athletes can earn various forms of compensation through NIL activities, such as:
Cash payments for services
Merchandise (e.g., clothing, equipment, electronics)
Any net income from NIL activities—including non-cash compensation—is considered taxable income. If a business provides an athlete free products in exchange for an endorsement, it is still taxable income. The athlete is required include the fair market value of those products in their taxable income.
What taxes need to be paid on NIL income?
Any net income from NIL activities is considered taxable income. The followingare potential taxes a college athlete will have to pay for net income earned from NIL activities:
Self-Employment Tax: The income generated from NIL activities is considered self-employed income. Self-employment tax is a tax consisting of Social Security and Medicare taxes. The self-employment tax rate is 15.3% (the sum of a 12.4% for Social Security and 2.9% for Medicare).
State Tax: Generally, in any state a college athlete earns income from NIL activities, the athlete will owe state income taxes.
Federal Tax: The standard deduction for 2021 is $12,550 for single filers (or $25,100 if married and filing taxes jointly). So the athlete will have to pay federal taxes if they make more than $12,550 if single or more than $25,100 as a married couple. All athletes have to fill out a tax return if they make at least $400 in NIL activities.
What is the deadline to file NIL revenue tax retuerns?
The tax deadline is April 15th of the following year. For example, NIL income earned in 2022 will require taxes to be filed around April 15th, 2023.
About Robert Hall & Associates
Robert Hall & Associates has been offering professional tax preparation and tax accounting services to individuals and businesses in California since 1971. Over that time, we have grown from a single person firm to California’s best and most trusted tax firm, processing more than 10,000 tax returns annually.
With years of experience in professional sports accounting and tax preparation, Robert Hall & Associates has worked with numerous athletes to increase their post-tax take-home income and decrease their tax liability. We are now offering this same expertise to college athletes generating income from NIL actives.
By concentrating on tax structuring for NIL athletes, our experts can help with:
- Structuring tax efficient entities for various type of businesses
- Help create a tax planning strategy that allows you to legally keep as much money as possible
- Maximizing your deductions (including content creation costs and equipment)
- Prepare your annual tax returns
Top NIL Athlete Tax Accountants
Robert Hall & Associates has assisted athletes in Los Angeles and nationally since 1971. We know how competitive and fast-paced the industry is, so our tax consultants will provide the latest information, anticipate needs, and offer solutions that you might not have considered.