The NIL Money Guide for Athletes and Families

A first NIL deal feels like free money. It is not. For most athletes it is business income, with no taxes taken out, and a tax bill that shows up months later when the money may already be spent. The good news: with a few habits from day one, NIL can pay for school, build savings, and teach real business skills. This guide is for the athlete and for the parents and grandparents helping them.

How NIL is taxed

• The IRS treats most NIL payments as self-employment income. You are an independent contractor, not an employee. Companies usually send a Form 1099-NEC once they pay you enough in a year to require one, but the income is taxable even if no form arrives.
• Free stuff counts. Products, gear, gift cards, meals, and services received for NIL work are taxable at their fair market value.
• You owe self-employment tax of 15.3% (12.4% Social Security plus 2.9% Medicare) on about 92% of your net NIL profit, on top of regular income tax. You can deduct half of the self-employment tax.
• You report NIL on Schedule C and Schedule SE with your Form 1040. A student generally must file if net self-employment earnings are $400 or more, even if they are claimed as a dependent.
• State income tax may also apply, sometimes in the state where you did the work, not just where you live.

Quarterly estimated taxes (2026 dates)

Because nobody withholds tax from NIL checks, the IRS expects you to pay during the year using Form 1040-ES or IRS Direct Pay. The 2026 due dates are April 15, June 15, and September 15, 2026, and January 15, 2027. Paying late can mean penalties. A common safe approach: pay at least 100% of last year's total tax (110% if last year's income was over $150,000), or 90% of this year's, spread across the four dates.

Write off real expenses, and keep receipts

• Agent, marketing, and legal fees related to NIL deals.
• Tax prep and bookkeeping for the NIL business.
• Equipment and software used to create sponsored content.
• Travel to and from paid appearances.
• A share of your phone bill used for NIL work.
• Not deductible: your everyday clothes, meals with teammates, or anything personal. Keep a simple spreadsheet and a photo of every receipt.

The House settlement and revenue sharing

On June 6, 2025, a federal judge approved the settlement in House v. NCAA. It includes about $2.8 billion in back damages for former athletes and, for the first time, lets schools pay athletes directly. For 2025-26, participating schools could share up to about $20.5 million with athletes, and the cap rises each year. A new body, the College Sports Commission (CSC), enforces the rules. Third-party NIL deals worth more than $600 must be reported through the CSC's NIL Go platform, which checks whether the deal has a real business purpose and pays within a reasonable range. Deals that do not clear can put eligibility at risk.

• Revenue-sharing payments from your school and NIL deals from outside companies are different things. Get both in writing.
• Ask your school's compliance office how it reports revenue-sharing payments for taxes (1099 or W-2). Most are treated as NIL-style payments with no withholding, so the set-aside rule applies.
• Collectives still exist, but their deals now face CSC review. Be cautious of any offer that looks like pay-to-enroll dressed up as marketing.

High school NIL

More than 40 states plus D.C. now allow high school athletes to earn NIL money in some form, according to trackers such as Opendorse, but the rules change often and a handful of states still do not allow it. Nearly every state association bans using school names, logos, and uniforms in deals, and bans deals tied to recruiting or in categories like alcohol, tobacco, gambling, and adult content. Check your state association's current rules before signing anything.

Minors and contracts

• Minors generally cannot be bound by contracts on their own, so companies usually require a parent or guardian to sign too. Read every word before you do: you may be taking on obligations.
• Some states allow court approval of contracts for minors in entertainment. California's Coogan law requires 15% of a minor's earnings under covered entertainment contracts to go into a blocked trust account. Whether a given NIL deal is covered depends on the deal and the state, so ask a lawyer.
• Money earned by a minor belongs to the minor. A custodial account (UTMA) or a custodial Roth IRA in the child's name keeps it clearly theirs. With NIL earnings, a teen can put up to the lesser of their earned income or $7,500 into a Roth IRA in 2026.

Agents, collectives, and fees

NIL agents and marketing firms commonly take 10% to 20% of deals they bring in. Many states require NIL agents to register or follow specific rules, and some limit contract length. Before signing: get the fee in writing, confirm it only applies to deals they actually find, check the contract length and how to exit, and never let an agent collect your money and pay you later. Payments should come straight to you or your business account.

How NIL can affect financial aid

NIL earnings count as student income on the FAFSA and can reduce need-based aid such as Pell Grants. The FAFSA uses tax information from two years earlier, so money earned in 2026 shows up on the aid application for the school year that starts in fall 2028. Plan for that lag, and talk to the school's financial aid office if a big NIL year is followed by a slow one. NIL income generally does not reduce an athletic scholarship.

Protect eligibility

• Report every deal the way your school and the CSC require.
• Do not use school marks, uniforms, or facilities without written permission.
• Stay away from sports betting deals. NCAA rules and many state NIL laws prohibit them.
• Keep copies of every contract, invoice, and payment.
• If a deal sounds like payment just to enroll or transfer, ask compliance first.