Financially speaking, college athletics are a whole new ballgame these days. Student-athletes can now be paid for the use of their name, image and likeness (NIL) without jeopardizing their eligibility. Payments largely come from boosters — individuals supporting their alma mater or favorite school. And for top high school recruits and elite transfer portal prospects in certain sports, millions of dollars may be at stake. Let's explore the tax impact for both groups.
In 2021, the National Collegiate Athletic Association (NCAA) adopted its interim NIL policy, allowing student-athletes to be paid without jeopardizing their NCAA eligibility. In addition, following the House v. NCAA settlement in 2025, participating schools were permitted to begin direct revenue-sharing payments to student-athletes, adding another layer of tax complexity beyond traditional third-party NIL deals.
The definition of NIL income is expansive. According to the IRS, it applies to:
Whatever form it takes, whether cash or noncash compensation, NIL income is generally taxable at the federal level.
Many student-athletes with third-party NIL deals are treated as independent contractors and may need to pay federal income tax and self-employment tax through quarterly estimated payments. For the 2026 tax year, the due dates are:
If a due date falls on a weekend or holiday in a given year, it's extended to the next business day.
Failure to make quarterly estimated payments may result in additional tax, interest and penalties. However, under two estimated tax safe harbors, student-athletes may be able to reduce or avoid underpayment penalties by paying:
There's a third, less frequently used exception as well. When income is earned unevenly throughout the year, a student-athlete may use the annualized income installment method to reduce or avoid penalties.
The main takeaway is that self-employed student-athletes can't wait until traditional tax time to settle up with the IRS. They must track their income throughout the year and pay estimated taxes.
Note: Some student-athletes may instead receive wages or other reportable payments from a school or other payer. If treated as employees, they'd have federal income taxes withheld and receive a Form W-2.
There are state income taxes to deal with, too. Student-athletes must report their income to their state of residency and pay taxes, if applicable. They may also face multistate filing obligations if they perform NIL services, make promotional appearances or earn income in states other than their state of residency.
Since 2021, financial support from boosters has poured in — from billionaires with premium season tickets to average, everyday fans who sit in the nosebleeds. Regardless of your financial standing, however, you may be hard-pressed to reap any tax benefits. Payments made directly to student-athletes aren't deductible because they're not considered qualified charitable contributions for tax purposes.
There may be a little more leeway for payments made to certain "collectives" used to disburse NIL income. These are third-party organizations formed by contributors of all stripes — including alumni, businesspeople and local supporters — to provide NIL income to student-athletes through social media promotions, personal appearances, autograph signings, endorsements and so forth. Although collectives operate independently, they're often closely associated with a particular college and focused on supporting that school's athletic programs.
To provide tax benefits to contributors, some collectives seek to attain tax-exempt status as qualified charitable organizations under Section 501(c)(3) of the tax code. Currently, the primary guiding authority for this strategy is IRS Advice Memorandum (AM) 2023-004, released on June 9, 2023. It concluded that many nonprofit NIL collectives don't qualify for tax-exempt status because they provide more-than-incidental private benefits to student-athletes.
In other words, these organizations don't always serve a public interest. If an organization benefits both public and private interests, AM 2023-004 requires the private benefit to be "both qualitatively and quantitatively incidental" to accomplishing the organization's tax-exempt purpose. This sets a high bar for most collectives; however, some do manage to clear it.
Bottom line: Contributions to a collective (or affiliated organization) that qualifies for tax-exempt status may be deductible, subject to the usual charitable contribution rules. However, payments can't be earmarked for a specific individual or exchanged for substantial benefits, such as athletic seating rights.
It's doubtful we've heard the last word on NIL income and its impact on federal and state taxes. Student-athletes and boosters alike should work closely with their tax advisors to understand all the rules and issues involved.