NIL Income and Taxes:
What College Athletes Need to Know Before April 15
NIL income is projected to exceed $2.5 billion in 2026. That’s real money going to real college athletes, and it comes with real tax obligations that most 19-year-olds have never thought about.
If you’re a college athlete earning from name, image, and likeness deals, here’s what you need to understand before April 15 catches up with you.
NIL Income Is Taxable Income
Every dollar you earn from NIL deals (brand sponsorships, social media posts, appearance fees, merchandise royalties) is taxable income. It doesn’t matter if the payment came through your school’s NIL collective, directly from a brand, or from a third-party marketplace. It’s income, and the IRS expects you to report it.
You’ll receive a 1099 form from any company that pays you more than $600 in a calendar year. But even if you don’t receive a 1099, the income is still taxable. The reporting requirement is on you.
Multi-State Filing Gets Complicated Fast
If you’re earning NIL income from brands based in different states, or if you’re making appearances or shooting content outside your home state, you may owe taxes in multiple states. The rules vary by state, and some states are more aggressive than others about claiming a piece of your income.
Self-Employment Tax Is the Surprise
Here’s what catches most college athletes off guard: NIL income isn’t just subject to regular income tax. If you’re earning as an independent contractor (and most NIL athletes are), you owe self-employment tax on top of your income tax. That’s an additional 15.3% on your first $168,600 of net self-employment income in 2026.
Said another way: if you earn $50,000 in NIL income this year, you could owe roughly $7,650 in self-employment tax alone, before regular income tax.
What Smart Athletes Do
Set aside 30-35% of every NIL payment for taxes. Put it in a separate account and don’t touch it.
Track every payment, every brand deal, and every 1099. Use a simple spreadsheet or ask your advisor to set one up.
Make quarterly estimated payments to avoid penalties.
Consider forming an LLC or S-Corp once your income justifies it. This can create tax savings on self-employment tax.
Work with a CPA or tax advisor who understands athlete taxation. This isn’t a TurboTax situation.
You Probably Need to Make Estimated Payments
If you expect to owe more than $1,000 in taxes for the year, the IRS wants you to pay as you go, not all at once in April. That means quarterly estimated tax payments, due in April, June, September, and January.
If you don’t make estimated payments and you owe a significant amount in April, the IRS charges an underpayment penalty. This is one of the most common mistakes college athletes make, and it’s completely avoidable with a basic tax plan.
We Can Help
At Paragon, we work with college athletes to build a tax and financial plan around their NIL income. Through Paragon Tax, we prepare your returns and help you structure your income so you’re not surprised in April. We’re fee-based fiduciaries. No commissions, no product sales, and no conflicts.
If you’re earning NIL income and don’t have a plan in place, let’s talk. No obligation.
FAQ
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Yes. All NIL income is taxable, including cash payments, products, and gifts above certain thresholds. You’ll receive 1099 forms for payments over $600, but all income must be reported regardless.
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An additional 15.3% tax on net self-employment income (covering Social Security and Medicare) that applies to most NIL income earned as an independent contractor.
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A safe estimate is 30-35% of each NIL payment. Put it in a separate account and don’t spend it.
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It depends on the amount. Once your annual NIL income reaches $30,000-$50,000 or more, an LLC taxed as an S-Corp can reduce your self-employment tax. Talk to a CPA before making this decision.
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Tennessee has no state income tax, which is a significant advantage. However, you may still owe taxes to other states where brands are located or where you perform services.