Colleges Now Allow Student Athletes to Profit from the Use of Their Name, Image, or Likeness

The National Collegiate Athletic Association (NCAA) is now allowing athletes to receive compensation for the use of their name, image, or likeness (NIL). This new source of income for student athletes brings with it tax filing requirements, which make it advisable for young athletes to consult with a tax professional to assist with both tax planning and tax preparation.

When students receive a scholarship from a university, the amount of scholarship in excess of tuition has always been taxable. In most cases, this is the room and board element of the scholarship and it is included in taxable income. The NCAA has a Student Assistance Fund (SAF) to assist student athletes in meeting certain needs that arise in conjunction with participation in intercollegiate athletics. Typically, the SAF is used to handle the federal, state, and local income tax tied to room and board and other financial help. The SAF amount is also included in the athlete’s taxable income.

Income from Name, Image, or Likeness (NIL) will also be treated as income. In most cases it will also be subject to self-employment tax (social security tax). The athlete may also be entitled to deduct certain expenses from the NIL income for tax purposes when these expenses are directly related to the production of the NIL income. These deductions would include tax planning fees, agent fees, NIL related travel and other expenses directly related to the NIL income. They could also be entitled to a Qualified Business Income (QBI) deduction.

This additional income and tax could also create a liability on the part of the student athlete for quarterly estimated payments. If this seems like a lot of complication for a college student, it is, however tax laws are not based on how young or old a person is. They are based on the amount of taxable income received by a person. So the best bet for young athletes that are receiving scholarships, student assistance funds and/or name, image, or likeness income is to consult a tax professional that knows how to deal with these items.