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The Cost of Being Paid: How NIL Turned College Athletes into Federal Taxpayers

When the NCAA formally allowed college athletes to profit from their Name, Image, and Likeness (“NIL”), it reshaped the landscape of amateur athletics — legally, competitively, and now, fiscally. While many players and fans view NIL as a long-overdue recognition of athletes’ market value, the IRS sees something else: taxable income.


Payday Without a Paycheck


Unlike a university stipend or part-time job, NIL earnings aren’t subject to automatic tax withholding.[2] Student-athletes are considered independent contractors, meaning that every dollar earned — from autograph sessions, sponsorships, or even free gear — must be self-reported to the IRS.[3] Consistent with this uncertainty in classification, the Third Circuit in Johnson v. NCAA held in 2024 that college athletes are not categorically excluded from employee status under the Fair Labor Standards Act and that their classification turns on the economic realities of the relationship rather than formal labels.[4] Currently, NIL income is classified as self-employment income, and thus subject to both federal income tax (ranging from 10% to 37% of net income, with the higher percentage for amounts over $626,350) and the approximately 15.3% self-employment tax that covers Social Security and Medicare contributions.[5]


Athletes unaccustomed to managing taxes must now function as small business owners – tracking income, saving for quarterly estimated payments, and keeping receipts and documentation of everything.[6] To meet these new federal tax obligations — since as independent contractors no one is taking tax withholdings out of their checks — experts recommend setting aside around 25–30% of NIL earnings, a challenging adjustment for 18-year-olds whose new “business ventures” are often fueled more by enthusiasm and professional aspirations than financial planning.[7] But it’s not all bad news, with the self-employment status also comes the ability to deduct legitimate business expenses, like travel costs for sponsored events, agent fees, and marketing materials from their taxable income.[8]


Although many student-athletes retain agents or professional advisors to negotiate NIL deals, representation alone does not eliminate the financial risks associated with NIL income. As commentators have observed, NIL compensation arrives before most athletes receive any formal education in tax compliance, budgeting, or long-term financial planning.[9] Recognizing this gap, some institutions have begun placing institutional “adults in the room” by hiring full-time staff to assist athletes with NIL-related financial decisions. San Diego State University, for example, employs an NIL coordinator to help student-athletes navigate financial and compliance issues tied to endorsement income.[10] Other proposed solutions include mandatory financial literacy coursework, which studies suggest significantly improves students’ ability to manage income, credit, and debt — an intervention that may be particularly critical for athletes suddenly operating as small business owners under the tax code.[11]


As a result of these changes, student-athletes must approach NIL not just as branding, but as business.


The International Athlete Dilemma


For international student-athletes, NIL introduces another layer of complexity – immigration law. Most compete under F-1 visas, which allow non-immigrant students to study at U.S. schools.[12] However, these visas strictly limit revenue generation by their holders; to the point that participation in the wrong kind of deal could result in termination of their program, loss of their visa, or even deportation from the U.S.[13] As is relevant here, F-1 visa holders are generally restricted to limited on-campus employment and passive income — that which is derived from sources that do not require active involvement or participation from the recipient, such as dividends, interest, royalties, rents, or capital gains.[14] In the modern world, where earning NIL income involves brand promotion, content creation, and appearances, there is little room, if any for passive income generation.[15]


Even when legally eligible to earn NIL income, international athletes are classified as “nonresident aliens” for U.S. tax purposes.[16] In these cases, their income is generally subject to a 30% flat withholding tax, unless a bilateral tax treaty with their home country provides a reduced rate.[17] Among the countless other pressures international teenage athletes face as they prepare to leave home to play in the NCAA, they now must consult a qualified tax professional before signing any NIL deal — a reflection of just how intertwined tax and immigration law have become in college athletics.


From the Locker Room to the Ledger


The introduction of NIL has brought thousands of young athletes into the tax system – many for the first time. For domestic players, the challenge lies in adapting to quarterly payments and business accounting. For international players, it is about staying compliant with the terms of their visas. The NCAA may have opened the door to NIL freedom, but the IRS holds the keys to keeping it open.


 

Easton Warner (guest writer) is a 2L at Villanova University Charles Widger School of Law. Easton is a Buffalo, New York native, and loyal Buffalo sports fan whose passion for sports started at a young age playing hockey. In 2024, Easton graduated summa cum laude from John Carroll University with a B.S. in Business Administration and a minor in Psychology. Following law school, Easton plans to pursue a career in Litigation.  

 

References:

[2] Samuel Handwerger, TerpTax: A Guide to NIL Taxes (June 23, 2025) University of Maryland Robert H. Smith School of Business. https://www.rhsmith.umd.edu/news/terptax-guide-nil-taxes#:~:text=Bottom%20Line%3A%20It%20All%20Counts,as%20Income.

[3] Id. 

[4] Johnson v. NCAA, 108 F.4th 163, 180 (3d Cir. 2024).

[7] Teamworks, NIL Tax Prep for Student-Athletes (March 27, 2024) https://teamworks.com/blog/admins-guide-to-nil-taxes/#:~:text=Most%20importantly%2C%20collegiate%20athletes%20need,money%20they%20have%20already%20spent; Samuel Handwerger, TerpTax: A Guide to NIL Taxes (June 23, 2025) University of Maryland Robert H. Smith School of Business. https://www.rhsmith.umd.edu/news/terptax-guide-nil-taxes#:~:text=Bottom%20Line%3A%20It%20All%20Counts,as%20Income.

[8] Samuel Handwerger, TerpTax: A Guide to NIL Taxes (June 23, 2025) University of Maryland Robert H. Smith School of Business. https://www.rhsmith.umd.edu/news/terptax-guide-nil-taxes#:~:text=Bottom%20Line%3A%20It%20All%20Counts,as%20Income.

[9] Brian Curcio, The Need For Financial Literacy With NIL (Jun 21, 2024) Forbes. https://www.forbes.com/sites/yassprize/2024/06/21/the-need-for-financial-literacy-with-nil/.

[10] Id. 

[11] Id. 

[12] IBP Immigration Law, Best Passive Income Ideas For F-1 Visa Holders https://ibplaw.com/how-f-1-visa-holders-can-generate-passive-income-while-studying-in-the-usa/.

[13] Id.

[14] Id. 

[15] See id.

[16] 26 U.S.C. § 7701(b)(1)(B); Samuel Handwerger, TerpTax: A Guide to NIL Taxes (June 23, 2025) University of Maryland Robert H. Smith School of Business. https://www.rhsmith.umd.edu/news/terptax-guide-nil-taxes#:~:text=Bottom%20Line%3A%20It%20All%20Counts,as%20Income.

[17] 26 U.S.C. § 1441; 26 CFR § 1.1441‑1; JamesMoore, Revenue Share and International Student-Athletes: What Universities Need to Know (August 13, 2025) https://www.jmco.com/articles/collegiate-athletics/revenue-share-international-student-athletes/.


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