NIL - Name, Image and Likeness and Your Taxes
You have to know the tax impact of your deals…DO YOU?
With college athletes legally allowed to make money from their Name, Image and Likeness (NIL) activities, there are still few resources for players to help them know what to do with the money once they are making it. We hope to change this!
Our mission is to empower NFL and college football players to take control of their personal finances. This starts with providing education on financial concepts for each player and their family while they are in college.
As part of this education, below is a guide of things to consider related to NIL activities and the income they generate.
Important numbers for student-athletes to know
$600 – if you earn more than $600 from any one company (cash, product value or crypto), you will receive a tax report detailing your income (typically a 1099-NEC or 1099-K).
$400 – if you have more than $400 of net income (gross income minus your expenses related to NIL activities), you need to file a tax return and pay self-employment taxes (15.3%).
$1,000 – if you think you will owe $1,000 or more in taxes, you must pay estimated tax payments on a quarterly basis. Payments are due April 15, June 15, September 15 and January 15.
50% – if the money you make personally (NIL and other income) covers more than 50% of your personal living expenses, your parents can’t claim you as a dependent.
Products and services received in NIL deals are considered taxable income
That’s right, you might have to pay taxes on items that you don’t actually receive cash for. Below are examples of items a student-athlete might receive instead of cash.
Cars/Trucks – a dealership giving you a car or truck in exchange for your NIL is taxable income to you at the fair market value of the vehicle.
Clothing/Shoes – if you receive clothing or shoes from brands in exchange for your NIL, the fair market value of the clothes or shoes is taxable income to you.
Food or Meals – receiving free food or meals in exchange for your NIL is taxable income to you at the value of the meal.
Crypto – payment in the form of cryptocurrency for your NIL is taxable to you just like cash.
NIL income could be taxable in multiple states
Depending on the state you live in, spend the most time in and perform the NIL activities in, you might have to pay state income taxes in multiple states. Some examples are below.
Arizona & California – if you are a resident of Arizona (your parents live there), attend college at USC and earn income from your NIL activities in and around Los Angeles, then you could owe state income taxes in both California and Arizona.
Texas & New York – being a resident of Texas means you do not pay state income taxes. However, if you are a resident of Texas, play for the University of Texas and during the summer live in New York for work related to NIL activities, you could owe state income taxes in New York.
Florida & Georgia – like Texas, Florida doesn’t have state income taxes. If you are a resident of Florida but play for the University of Georgia and earn NIL money in Georgia, you could owe state income taxes in Georgia.
Expenses related to NIL activities can be deducted from the NIL income you earn
The expenses must be directly related to performing your NIL activities. Some examples of common expenses related to NIL activities are listed below.
Airfare – flights to and from a photo shoot for a brand you have an NIL deal with are deductible.
Hotels – your hotel stay while attending an event that you are being paid to attend as part of your NIL deal with a brand is deductible.
Meals – meals you pay for while working as part of your NIL deal are deductible, typically at 50% of the value (with some exceptions).
Marketing Agency Fees – fees you pay to marketing agencies to help you with or obtain NIL deals are deductible against the income you earn from your NIL deals.
Your NIL money could impact your financial aid
You are required to disclose all income earned on your FAFSA, including your NIL income. This means that your NIL income could impact your “needs based” aid.
Pell Grants – if you currently qualify, these are likely to be most impacted by your NIL income. We always recommend that you consult your college’s financial aid department about this before engaging in any NIL deals.
NIL has created fantastic opportunities for all student-athletes, especially football players, to rightfully earn money for their personal brand and success. From our perspective, earning the money is just the start of the opportunity, using the money to create a better future for you and your family turns the opportunity into a success story.
Our goal is to help as many football players as possible achieve this level of success. Reach out to us to discuss your individual situation and learn more about how to maximize this opportunity.
As a note, this material has been prepared for information purposes only and should not be relied on for tax, legal or accounting advice. Given the complexities and nuances in filing and paying taxes, this blog does not cover all the potential tax implications associated with NIL earnings. Therefore, a personalized consultation that includes a tax accountant and attorney, is required to navigate all the taxes applicable to your NIL earnings.