2026 Edition
NIL Wealth Strategies — 2026 Athlete & Family Tax Education Guide
What every athlete and parent should know about NIL income, taxes, and staying protected. This comprehensive guide is refreshed annually to ensure coaches, families, and athletes always have the most accurate and current information. Supported by Enrolled Agent (EA) level tax expertise to help you navigate the complex world of NIL taxation with confidence.

Important Disclaimer: This guide is for educational purposes only and does not constitute legal or tax advice.
NIL Tax Cheat Sheet
Navigating NIL income and taxes can feel complex, but understanding a few key principles can save you from unexpected financial surprises. This cheat sheet provides essential, actionable advice for every NIL athlete.
Most NIL Income is Taxable
Most NIL money is considered self-employment income (1099 income), meaning taxes are not automatically withheld. This requires proactive planning from your side.
Two Main Types of Taxes
  • Federal/State Income Tax: Based on your taxable income after deductions.
  • Self-Employment Tax: Covers Social Security and Medicare contributions. Even with low income tax due to standard deductions, you may still owe this.
Save 25-30% of Payments
As a safe rule, set aside 25-30% of every NIL payment in a separate, dedicated savings account. This strategy helps ensure you have funds available when tax bills are due, preventing future financial stress.
Track Your Expenses Diligently
Keep records of all NIL-related expenses throughout the year. Legitimate business expenses – such as mileage for events, content creation equipment, editing software, or paid travel for appearances – can significantly reduce your taxable profit.
Consider Quarterly Estimated Taxes
If you earn NIL income consistently throughout the year, rather than just from a single deal, you may be required to make quarterly estimated tax payments. Key due dates are:
  • April 15
  • June 15
  • September 15
  • January 15
Remember, these are estimated payments; you'll still file your complete tax return by April 15th of the following year.
Why This Guide Matters: Real Consequences
Most athletes were never taught about taxes in school, yet the IRS expects everyone to follow the rules — even students and first-time earners. NIL income can be absolutely life-changing, providing financial opportunities that previous generations of college athletes could only dream about. However, it can also create surprise tax bills that catch athletes and families completely off guard if money is spent without proper planning and tax consideration.
This isn't meant to scare you — it's meant to empower you. Understanding your tax obligations from day one means you get to keep more of what you earn, avoid costly penalties, and build wealth strategically. The difference between an athlete who plans for taxes and one who doesn't can literally be thousands of dollars and countless hours of stress.
This Guide Helps Athletes and Families:
  • Avoid common tax mistakes that cost money
  • Prevent penalties and interest charges
  • Stay organized with simple tracking systems
  • Keep more of what they earn through smart planning
  • Build confidence in managing NIL finances
This guide is built from real IRS tax rules and actual athlete income scenarios. NIL Wealth Strategies is committed to delivering accurate tax education supported by Enrolled Agent (EA) level expertise — so athletes and families can stay organized, avoid penalties, and keep more of what they earned.
The Biggest Tax Truth Most People Don't Know
The Dangerous Myth
"If nobody took taxes out of my payment, that means I don't owe taxes, right?"
The Real Truth
If taxes aren't withheld, it usually means you may owe MORE later — because you're responsible for paying it yourself.
Understanding Withholding: W-2 vs 1099 Income
W-2 Jobs (Traditional Employment)
When you work a regular job — like retail, restaurants, or campus employment — your employer typically withholds payroll/FICA taxes automatically from every paycheck. You see the gross amount you earned, then you see deductions for federal tax, Social Security, Medicare, and sometimes state tax. What hits your bank account is the "net" amount after taxes.
  • Taxes taken out automatically
  • Employer handles the paperwork
  • Smaller surprise bills at tax time
1099 NEC Income (Independent Contractor)
Most NIL income works differently. When a brand pays you $1,000 for a sponsored post, you receive the full $1,000. No taxes are taken out. It feels like you're getting more money, but the reality is you're now responsible for setting aside money to pay federal income tax, self-employment tax, and possibly state tax.
  • No taxes withheld
  • You must save and pay taxes yourself
  • Higher risk of surprise tax bills

When taxes are not withheld, you still owe taxes — you just have to pay them yourself. This is the #1 reason athletes get caught off guard at tax time.
Why Do We Need Taxes
Understanding why taxes exist can make paying them feel less painful. Taxes aren't just money disappearing into a void — they fund essential public services that impact your daily life and future security. Your tax contributions support schools and education programs, maintain roads and infrastructure, fund police, fire departments and emergency services, operate courts and government programs, and provide crucial safety nets for communities.
Social Security
Provides retirement income and disability support later in life when you need it most
Medicare
Ensures healthcare coverage and support as you age, protecting your long-term health
Public Services
Maintains the infrastructure, education, and safety systems we all depend on daily
How the IRS Taxes Your Income
Many people think taxes are one flat percentage, but the reality is more complex. There are actually different types of taxes that apply to your income, and understanding each one helps you plan better and avoid surprises when you calculate what you might owe.
Federal Income Tax
Your federal income tax depends on your taxable income and uses progressive brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. You only pay the higher rate on income that falls into that bracket — not your entire income. Most athletes fall into the 10% or 12% brackets. (Link Below)
State Income Tax
State income tax depends on the state you live in. Some states have no state income tax at all (like Florida, Texas, Tennessee, and Georgia), while other states use their own tax brackets and rates. If your state has income tax, it gets added on top of your federal income tax
Social Security Tax
W-2 employees pay 6.2% (employer pays the other 6.2%). Self-employed individuals (1099/NIL) pay the full 12.4%. This funds your future retirement benefits.
Medicare Tax
W-2 employees pay 1.45% (employer pays the other 1.45%). Self-employed individuals pay the full 2.9%. This funds your future healthcare benefits.
Total Self-Employment (SE) Tax
For NIL athletes, Social Security + Medicare = 15.3% SE tax on net profit. This is often the biggest tax surprise for first-time NIL earners.
IRS Resource: Federal Income Tax Brackets

www.irs.gov

Federal income tax rates and brackets | Internal Revenue Service

See current federal tax brackets and rates based on your income and filing status.

Key Tax Concepts
Your filing status directly affects your tax brackets, standard deduction amount, and eligibility for certain credits. It's one of the first questions you'll answer when filing taxes, and choosing correctly can significantly impact how much you owe or get refunded. Most college athletes file as "Single," and many are still claimed as dependents on their parents' tax returns. Being a dependent can affect certain credits and how your parents file their taxes, but it doesn't eliminate your responsibility to report NIL income — you still must file and pay taxes on what you earn.
Single
Most common status for college athletes who are unmarried
Married Filing Jointly
For married couples who file one combined tax return together
Head of Household
For unmarried individuals who support a dependent and pay household costs
The Standard Deduction: Your $14,600 Shield
The standard deduction is one of the most important concepts in personal taxation, yet many first-time filers don't fully understand it. Think of it as an automatic "freebie" amount that reduces your taxable income. The standard deduction is updated yearly based on inflation. For most single filers it’s around the mid-$14,000s+ range. For single filers in 2026, the standard deduction is approximately $14,600. This means the first $14,600 of your income is essentially shielded from federal income tax. If your net profit is lower than the standard deduction, you may owe little to no federal or state income tax — but you will still owe self-employment tax, because the standard deduction does not reduce self-employment tax.
What the Standard Deduction Does:
  • Lowers taxable income: If you earned $20,000 in NIL income and have no business expenses, your taxable income would be $20,000 - $14,600 = $5,400
  • Reduces income tax: You only pay federal income tax on the amount above the standard deduction
  • Automatic benefit: You don't need receipts or documentation — it's automatically available to all filers
$14.6K
Standard Deduction
Automatic shield for single filers

Critical Point: The standard deduction reduces your income tax, but it does NOT reduce your self-employment tax. This is why NIL athletes can still owe significant taxes even when their taxable income seems low.
W-2 vs 1099: Understanding Your NIL Income Structure
W-2 Income (Employee)
Traditional employment where taxes are withheld automatically, you receive a W-2 form in January, and your employer handles tax paperwork
1099 NEC Income (Contractor)
Independent contractor work where no taxes are withheld, you receive full payment, you're responsible for saving and paying taxes, and you receive 1099 forms
The distinction between W-2 and 1099 income is absolutely critical for NIL athletes to understand because it fundamentally changes your tax obligations and responsibilities. Most NIL income — brand deals, sponsorships, appearance fees, social media promotions — falls into the 1099 NEC category, which means you're treated as an independent contractor rather than an employee.
What Counts as NIL Income?
NIL income encompasses a wide variety of revenue streams, and athletes are often surprised by just how many different types of payments qualify. Understanding what counts as taxable NIL income is essential because the IRS expects you to report all income, even if you don't receive an official tax form for it. Here are the most common types of NIL income athletes receive:
Sponsorships & Brand Deals
Money paid by companies to represent their products or services
Social Media Posts & Promotions
Payments for Instagram posts, TikTok videos, YouTube content, or other social promotions
Appearances & Events
Fees for attending events, making public appearances, or representing brands at functions
Autograph Signings
Income from autograph sessions or memorabilia signing events
Camps & Clinics
Revenue from hosting or participating in sports camps, training sessions, or instructional clinics
Royalties & Licensing
Ongoing payments from licensing your name, image, or likeness for products or media
Content Creator Revenue
YouTube ad revenue, Twitch subscriptions, podcast sponsorships, or other content monetization
Merchandise Sales
Profit from selling your own branded merchandise, apparel, or products

Critical Reminder: Even if you don't receive a 1099 NEC form or any official tax document, the income is still taxable and must be reported. The IRS doesn't need to send you a form for income to count — you're responsible for tracking and reporting everything you earn.
Business Deductions for NIL Athletes
For NIL athletes, understanding tax deductions is paramount. A deduction is essentially a qualified business expense you incur to earn your NIL income. By tracking and claiming these expenses, you can significantly reduce your "taxable profit," which is the amount of income the IRS considers when calculating your tax liability. The lower your taxable profit, the lower your overall tax bill. However, it's crucial to distinguish between legitimate business expenses and personal expenses. The IRS has strict rules, and misclassifying personal costs can lead to audits and penalties.You also get to deduct half of your self-employment tax on your tax return. That doesn’t reduce SE tax itself, but it reduces income tax.
Legitimate Business Deductions
To help you keep more of your NIL earnings, here are some common types of business expenses that athletes can legitimately deduct, provided they are directly related to your NIL activities:
Equipment & Technology
Essential gear like cameras, lighting, microphones, laptops, or even a dedicated phone used primarily for NIL content creation and business operations.
Software & Digital Tools
Subscriptions for video editing software, website hosting, domain name registrations, scheduling apps, or graphic design tools used to manage your NIL brand.
Travel & Transportation
Costs associated with business travel, such as mileage for trips to NIL events, flights, and hotel stays for appearances (distinguish from personal vacations).
Professional Services
Expenses for professional photography or videography for branding, tax preparation fees, business coaching, or legal services related to your NIL agreements.
Marketing & Promotion
Costs for branding materials, business cards, website development, or social media advertising specifically used to promote your NIL work.
Home Office Expenses
A calculated percentage of utility bills (phone, internet) if you have a dedicated space in your home used exclusively and regularly for your NIL business.
What's NOT Deductible: Personal expenses like rent, groceries, regular clothing (unless it's a branded uniform for appearances), haircuts, gym memberships, or everyday living costs are NOT deductible. Incorrectly deducting personal expenses can trigger an audit, requiring you to prove every deduction with documentation.
The Two Types of Taxes NIL Athletes Pay
This is where many athletes and families get confused, and it's also where the biggest tax surprises happen. Unlike a traditional W-2 job where you might just think about "income tax," NIL athletes typically face two separate tax obligations that work differently and hit your wallet in different ways. Understanding both is essential to accurately estimating what you'll owe and avoiding shock when tax bills arrive.
Income Tax (Federal + State)
This is the tax most people think of when they hear "taxes." Federal income tax is calculated based on your taxable income — which is your total income minus the standard deduction and any eligible deductions. Because of the standard deduction ($14,600 for single filers), many athletes with moderate NIL income pay relatively little income tax.
  • Based on taxable income after deductions
  • Uses progressive tax brackets (10%, 12%, 22%, etc.)
  • State income tax may also apply depending on where you live
Self-Employment (SE) Tax
This is the tax that catches most athletes off guard. SE tax covers Social Security and Medicare taxes for people who work for themselves (1099 NEC). It's calculated on your net earnings (profit after expenses), and it applies even if your income tax is very low or zero because of the standard deduction. SE tax is 15.3% of net earnings.
  • 15.3% total (12.4% Social Security + 2.9% Medicare)
  • Calculated on net profit, not taxable income
  • Does NOT benefit from the standard deduction
Why W-2 Jobs Feel Easier Than 1099 Work
When you work a W-2 job, your employer withholds Social Security and Medicare taxes (collectively called "FICA" taxes) from every paycheck. But here's the key advantage: the employer pays half and you pay half. You only see 7.65% deducted from your paycheck (6.2% Social Security + 1.45% Medicare), and your employer contributes the other 7.65% without you even seeing it.
With 1099/NIL income, you pay both halves. You're responsible for the full 15.3% self-employment tax. There's no employer to split the cost with you. This is why self-employment can feel significantly more expensive from a tax perspective, and why it's critical to save a higher percentage of your NIL income compared to what you might save from a regular job.
W-2 Employee
Pays 7.65% (employer pays other 7.65%)
1099 NEC (NIL)
Pays full 15.3% (no employer to share cost)
Real Example: Why Athletes Still Owe Taxes
Let's walk through a realistic scenario that shows exactly why so many athletes are caught off guard by their tax bills. This example demonstrates the two separate tax calculations — income tax and self-employment tax — and reveals why SE tax is usually the bigger financial impact, even when income tax seems manageable. Understanding this math is the difference between being prepared and being shocked in April.
Scenario: Single Athlete, 10% Tax Bracket With 5.19% GA State Tax
NIL Income Received
Total gross revenue from sponsorships
$30K
Business Expenses
Legitimate costs to earn income
$5K
Net Profit
Income after qualified expenses
$25K
Our athlete received $30,000 in NIL payments throughout the year from various brand deals and social media promotions. They spent $5,000 on legitimate business expenses like camera equipment, editing software, mileage to events, and professional photos for their social media. This leaves a net profit of $25,000.
Now here’s where many athletes misunderstand their tax situation. They see $25,000 profit and think: “The standard deduction is $14,600, so I won’t owe much.” That may reduce income tax, but it does not eliminate the biggest NIL tax: self-employment tax
Calculating Self-Employment Tax
Self-employment tax does not use the standard deduction. Instead, it's calculated on net earrings which is 92.35% of your net profit. So this athletes net earnings for self-employment tax purposes are: $25,000 × 92.35% = $23,087.50
Now apply the 15.3% SE tax rate: $23,087.50 × 15.3% = $3,533
So the athlete owes about: $3,533 in self-employment tax. This is the part that catches athletes off guard.
You can deduct half of your self-employment tax on your tax return.
This does not reduce self-employment tax — it only reduces income tax.
$3,533 ÷ 2 = $1,766.50 available to deduct from income tax.
Calculating Federal Income Tax
Federal income tax is based on taxable income, not profit.
Start with net profit: $25,000
Deduct half of self-employment tax from net profit:
$25,000 − $1,766.50 = $23,233.50
Now subtract the standard deduction ($14,600 in 2026):
$23,233.50 − $14,600 = $8,633.50 taxable income
Now apply the federal tax bracket to taxable income:
$8,633.50 × 10% = $863
Calculating State Income Tax (Georgia)
Georgia state tax is separate from federal tax.In this example, the athlete lives in Georgia, so they are subject to the GA 5.19% state income tax.
$8,633.50 × 5.19% = $448
$3,533
Self-Employment Tax
$863
Federal Income Tax
$488
State income Tax (GA)
$4,884
Total Tax Owed to IRS

Even though income tax was only $1351 (federal + state income tax), the total tax bill is $4,884 because of self-employment tax. Save 30% of every NIL payment until you learn your exact situation— not because income tax is high, but because SE tax adds up quickly.
Organization & Tax Deadlines
Organization isn't exciting, but it's the difference between a smooth tax filing process and a stressful scramble through emails and bank statements trying to piece together what you earned and spent. Set up a simple system now and maintain it throughout the year. Create digital or physical folders for: NIL Income (all payment confirmations and contracts), Receipts (all business expense receipts with notes on what they were for), Contracts (copies of all NIL agreements), Tax Forms (W-2s, 1099s, and any other tax documents), and Bank Statements (monthly records showing income and expenses).
Tax Deadline: April 15
Most individual tax returns must be filed by April 15 each year. If you miss this deadline and owe taxes, penalties and interest immediately begin accumulating. Even if you can't afford to pay your full tax bill, file your return on time anyway. The penalty for filing late is much steeper than the penalty for paying late. You can set up payment plans with the IRS if needed, but you must file first.
January 31
Deadline for businesses to send you the W-2 and 1099 forms
April 15
Tax filing deadline for most individuals
October 15
Extended deadline if you filed for an extension through Form 4868 (but payment still due April 15)
Quarterly Estimated Taxes
If you earn significant NIL income throughout the year, the IRS expects you to pay taxes quarterly rather than waiting until April to pay everything at once. These are called "estimated tax payments," and they're designed to mirror the withholding that happens automatically with W-2 jobs. Paying quarterly helps you avoid a massive tax bill in April and prevents underpayment penalties. Estimated payments are paid directly to the IRS using their online Direct Pay system, and you should always save payment confirmations as proof.
Q1 Payment — April 15
Covers January 1 through March 31 income
Q2 Payment — June 15
Covers April 1 through May 31 income
Q3 Payment — September 15
Covers June 1 through August 31 income
Q4 Payment — January 15 (next year)
Covers September 1 through December 31 income
One-Time NIL Deal vs Ongoing NIL Income
Example A: One-Time Payment
You receive a single $5,000 NIL payment for one brand deal. This is your only NIL income for the entire year, and you have no other self-employment income.Because your profit is low, the standard deduction is larger than your income, which means you may owe little to no federal income tax.
However, it’s important to understand that self-employment tax can still apply, because the standard deduction only reduces income tax — it does not eliminate self-employment tax. In many one-time NIL situations like this, quarterly estimated payments usually aren’t necessary. You can simply report the income when you file your annual return in April and pay any taxes owed at that time.
Example B: Multiple Ongoing Deals
Now imagine the athlete earns NIL income throughout the year from multiple sources. They earn $30,000 total and spend $5,000 in legitimate business expenses to end the year with a $25,000 net profit. In this scenario, quarterly estimated tax payments are highly recommended to avoid penalties and prevent a huge bill in April. Based on the example earlier in this guide, the athlete’s total estimated tax bill was $4,844. Since quarterly payments are made four times per year, the athlete would divide that total by 4 to estimate what to send each quarter: $4,844 ÷ 4 = $1,211 per quarter. Paying around $1,200 per quarter helps athletes stay protected, avoid IRS penalties, and avoid getting hit with a surprise tax bill at the end of the year.
LLC and S-Corp: Should You Consider Business Structures?
As NIL income grows, some athletes explore forming an LLC (Limited Liability Company) or even electing S-Corp tax status. These decisions should be made carefully with professional guidance. An LLC provides legal separation between your personal and business finances, looks professional to brands and sponsors, and simplifies organization and bookkeeping. However, forming an LLC does NOT automatically lower your taxes — it's primarily a legal and organizational tool.
An S-Corp is a tax election (not a separate entity) that can potentially reduce self-employment tax for higher-earning athletes by splitting income into salary and distributions. However, S-Corps require payroll compliance, additional filings, and accounting costs. Most athletes don't need an S-Corp in the early stages of their NIL journey. It becomes worth exploring when profit is consistently high year after year.
Common Athlete Tax Mistakes to Avoid
  • Spending all NIL money without saving for taxes
  • Not keeping receipts or records of expenses
  • Mixing personal and business spending in the same accounts
  • Assuming no tax form means no tax obligation
  • Ignoring IRS mail or notices
  • Filing late because you can't afford to pay (always file on time even if you can't pay immediately)
Official IRS Tools & Resources
The IRS provides free tools to help you estimate taxes and make payments:
Need Help Beyond This Guide?
If you want personalized support understanding your specific situation or setting up a simple system to stay organized, professional help is available. NIL Wealth Strategies works with an Enrolled Agent (EA) — a federally licensed tax professional authorized to represent taxpayers before the IRS. EAs can assist with tax planning, filing support, responding to IRS letters, and building long-term wealth strategies.

This guide is for educational purposes only. NIL Wealth Strategies does not provide legal advice. For specific tax or legal guidance related to your unique situation, please consult with a qualified professional.