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March Madness is back. While fans focus on brackets and buzzer-beaters, many student-athletes are facing a different challenge off the court: navigating the tax consequences of compensation they receive for the use of their Name, Image, and Likeness (NIL). Typical NIL recipients are talented young athletes, likely tax rookies, who can quickly find themselves thrust into complex tax situations based on their receipt of NIL earnings.
If you’re a student-athlete earning NIL income, you may be entering the tax system for the first time – or facing a level of complexity you’ve never dealt with before. You may have only filed a simple return in the past – or never filed at all. Now, you could be receiving payments (and perks) from multiple sources, often with little or no tax withheld. That means you could owe taxes you weren’t expecting, need to make payments during the year – not just at filing time, and owe tax on benefits that don’t feel like income, like free gear or use of a car.
Without clear guidance, it is easy to fall behind or face unexpected taxes.
Navigating NIL tax issues can feel like trying to pick a perfect bracket without knowing anything about the game being played or teams involved.
Taking a few steps early can help you avoid major problems later. You should keep detailed records of all contracts, payments, and benefits; track the value of non-cash items; set aside money for taxes as you earn income; consider making estimated tax payments; and seek help from a qualified tax professional if needed.
The system is complex – but with the right information, you can make smart moves early and avoid costly mistakes later.
To help explain the complexities of the NIL framework, I’m lacing up the hypothetical basketball shoes of a student-athlete to walk through an NIL and tax journey. Fortunately for me, no muscles were pulled during this exercise.
Following the Supreme Court’s 2021 decision in National Collegiate Athletics Association v. Alston and subsequent changes in NCAA and state rules, student-athletes began receiving compensation for the use of their NIL. Subsequent litigation resulted in a 2025 settlement that permits institutions to directly pay student-athletes a portion of their sports-related revenue. Most states now also allow NIL compensation for high school students.
NIL-related opportunities may include endorsement deals and payment for appearances, autograph sessions, and various other activities. The type and structure of the NIL compensation determine how the income is reported and taxed. While NIL opportunities create exciting new possibilities for student-athletes, they also come with tax responsibilities that many young taxpayers may not fully understand.
Let’s assume our student was fortunate to be offered several NIL opportunities and accepted the following:
NIL income can create layered tax issues, especially when athletes receive compensation from multiple sources with different reporting requirements. Tax complexity related to NIL income can escalate quickly, particularly for young taxpayers who may have little experience with the tax system. Without guidance, these young taxpayers may face unexpected tax bills, penalties, or compliance challenges.
In many cases, student-athletes receive NIL income without any taxes withheld, and they may be surprised to learn they owe taxes when they file their returns. Non-cash compensation such as trading cards, apparel, use of a vehicle, and unlimited food vouchers must generally be included in income at its fair market value, which can be difficult to determine. Student-athletes may suddenly find themselves responsible for estimated tax payments, deciding whether to form a business entity, and figuring out how federal, state, and local tax rules apply. In addition, they may need to determine whether self-employment tax applies and which expenses, if any, are deductible.
Taxpayers who expect to owe tax that is not withheld from payments generally must make quarterly estimated tax payments; otherwise, they may face a significant bill at filing time if they have not set aside funds.
You need to think about taxes throughout the year – not just when it’s time to file.
For example, many student-athletes are surprised to receive Forms 1099 showing an income amount for benefits the athletes thought they were getting for “free,” including food vouchers, trading cards, apparel, trips, and the use of cars. Because these benefits are often not paid in cash, athletes will have to find other sources of funds to pay the taxes owed on the income.
Based on our athlete’s NIL compensation, next filing season, she may receive multiple information returns, reporting a combination of non-employee compensation (often reported on Form 1099-NEC) and royalty income (often reported on Form 1099-MISC). Because NIL arrangements are still evolving, different institutions and other payers may classify income differently. In addition, a portion of her scholarship may be taxable, and some student-athletes may work side jobs and receive wage income, which can further complicate their tax situation. As a result, tax obligations vary widely and depend on each athlete’s specific circumstances. To appropriately plan for issues like estimated tax and potential business entities and deductions, athletes need to think about tax issues throughout the year, well in advance of filing their tax return.
Bottom line: Taking a few steps early can help you avoid major problems later. You should keep detailed records of all contracts, payments, and benefits; track the value of non-cash items; set aside money for taxes as you earn income; consider making estimated tax payments; and seek help from a qualified tax professional if needed. These steps can help you avoid surprises – and give you more control over your tax situation.
Today’s NIL tax landscape effectively turns many student-athletes into small business owners, a shift that can carry significant tax burdens for athletes likely unfamiliar with the tax code. Student-athletes are personally responsible for tracking every dollar they earn and making estimated tax payments, since taxes on their NIL income are rarely withheld at the source. This is very different from a traditional job, where taxes are generally withheld.
For a student-athlete like ours who must balance classes, training, and competition on the court, the complex tax requirements and obligations placed upon her can be overwhelming. With the right preparation, students can stay focused on their performance – both on and off the court – and avoid costly tax surprises. Understanding the rules likely makes professional tax guidance a necessity rather than a luxury.
The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget. NTA Blog posts are generally not updated after publication. Posts are accurate as of the original publication date. Portions of this blog may have been developed with the assistance of artificial intelligence. All AI-assisted content has been reviewed, verified, and approved by the National Taxpayer Advocate or TAS staff to ensure accuracy and integrity.