NIL (Name, Image, Likeness): Income Tax Considerations for Student-Athletes


Student-athletes can now enter into name, image and likeness (NIL) contracts for compensation. NIL contracts have major federal and state tax implications, including income tax responsibilities, state nexus and reporting obligations. How should athletes and their advisors navigate compensation issues related to NIL contracts so that there are no tax surprises? We share valuable insight on the game-changing issues related to NILs.

NIL contracts can provide athletes with the ability to generate income through endorsements and sponsorships without impacting their NCAA eligibility. Generally, “NIL compensation” refers to the monetary compensation and/or goods a student-athlete can earn by entering into contracts to promote and market their NIL. 

Before July 1, 2021, student-athletes were prohibited from profiting from NIL deals. The NCAA board of governors, in response to class action lawsuits and court decisions, as well as NIL legislation that has now been passed in some form in nearly 30 states, introduced a new interim policy that became effective on that date (with all three NCAA divisions also adopting the interim policy) and suspends the previous policy.

The interim policy only pertains to NIL, as the prohibitions on “pay for play” (i.e., students may not enter into deals that are contingent on participation in athletics) and other improper recruiting incentives continue to apply. The interim policy is scheduled to remain in effect until either federal legislation or new NCAA rules are adopted.

Based on the interim policy—and combined with recent state legislation—student-athletes are able to be compensated for the use of their NIL. Compensation can be monetary and/or non-monetary. Common examples of non-monetary compensation include free merchandise, social media partnerships and the like.

Regardless of the form of compensation, student-athletes must consider the federal and state income tax implications of their NIL deals. Compensation is considered taxable income so the athlete will have to file federal and possibly state income tax returns and pay any tax due. While abundant and lucrative opportunities exist for student-athletes to monetize their NIL, they need to be cognizant of potential tax obligations, be able to navigate federal and state tax laws and understand how their NIL deals are structured.

The NCAA interim policy guidance allows students to engage in NIL activities provided the activities are consistent with the law of the state where the school is located and allows students in states without NIL laws to participate in NIL activities without breaching NCAA rules.

Federal Tax Considerations

As noted above, both monetary and non-monetary compensation are considered taxable income. Collegiate athletes will need to file a tax return if they are benefiting from their NIL, and, for most student-athletes, this will likely be the first time they have an income tax return filing requirement. There are a few issues that will need to be addressed before filing a return.

Sponsorship/service income: Sponsorship/service income is one of the most common types of income derived by student-athletes from NIL deals. Under these types of deals, the athlete is required to present logos or products at an event for which he/she receives some kind of compensation.

Cash awards: Cash awards from NIL income likely will need to be reported on Form 1099-NEC, which the student-athlete will receive every year from the organization the athlete is representing, and such income must be included in the student’s taxable income. Notably, these earnings are different from W-2 wages, and no income taxes will be withheld. The athlete will be subject to both income tax and self-employment tax and will be required to file returns. The student-athlete likely will also need to make quarterly estimated tax payments with respect to such income.

Royalty income: If the athlete is compensated for the use of his/her NIL on media, such as video games, the compensation will be treated as royalty income. Royalty income is included in the athlete’s taxable income. The key difference between royalty income and sponsorship/service income is that the athlete does not have any obligation to present the sponsor’s logo or products in the case of royalties.

Impact on financial aid: Income/benefits received by a student-athlete must be included in taxable income reported on the FAFSA (Federal Student Aid) application and potentially could impact the amount of financial aid granted. Pell grants are based on a few other factors, but can also be impacted by NIL income.

Non-cash NIL benefits can be considered taxable income and should be taken into account when assessing the financial needs for education. For example, if the student-athlete is compensated for autographs, appearing in an advertisement or on social media, he/she is required to notify the school program and include such consideration in gross income.

The NCAA has released general guidance for college financial aid offices, but it only states that NIL income should be taken into account in determining the amount of financial aid and does not consider the impact of NIL on student income.

State Tax Implications

College athletes generating income from NILs potentially will need to navigate a number of state income tax issues. Complex issues also could arise with respect to the student-athlete’s residency status. A student athlete’s “home state” normally will remain his or her state of residence even if the athlete leaves that state to play for a university in another state. For example, an athlete that is a resident of California, but attends the University of Texas, will generally remain a California resident for state income tax purposes. Student-athletes will need to understand the domicile and statutory residency rules and the factors for establishing residency for the state in which they attend school and their “home state” if they intend to change their residency to the state where the university is located.

With respect to income tax, not all states impose income taxes, but other states can impose tax at rates up to 13.3% and the rules on tax deductions can vary. If a state imposes a personal income tax, the student-athlete’s residence state will tax the athlete’s income from all sources while nonresident states (including the state where the athlete’s university is located and states where the athlete plays games or makes appearances) could seek to tax a portion of the athlete’s NIL earnings. Similar to professional athletes and entertainers, will states seek to source or apportion athletes’ NIL income using game days or duty days formulas? Further, what reporting obligations could apply from state to state?

These and other potential state tax issues presented by NIL will need to be addressed by student-athletes, their universities and advisors.


Allowing student-athletes to profit from the use of their NIL is a game changer. However, NIL legislation varies from state to state, which can create uncertainty and confusion. It remains to be seen whether and how NIL will be legislated at the federal level. Licensing agreements can differ in terms of compensation and rights granted to the student-athlete. Further, it is critical that student-athletes fully understand the potential tax and reporting requirements and stay on top of developments as the playing field continues to evolve at both the state and federal levels. We recommend student-athletes generating income from their NIL assets obtain professional advice to help navigate these complex issues.


Reach out to David Uslan or our Tax team for any questions! 

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