Yes. NIL money is income, it is taxed as self employment income, and it arrives with nothing withheld. A player who is paid $50,000 by a collective receives $50,000 and owes the federal government, usually his state, and in many cases the state where the money was earned. The scholarship that covers his tuition is tax free. The revenue share the school pays him is not. And a large NIL year affects his federal financial aid two years later. Most of the trouble athletes have with NIL money comes from learning these things in April.
What Gets Taxed
| Money | Taxable? | How |
|---|---|---|
| NIL cash from brands, collectives, fans | Yes | Self employment income on Schedule C |
| Free products, cars, travel received for endorsements | Yes | Taxed at fair market value |
| School revenue share payments | Yes | Reported by the school; treatment varies by contract |
| Scholarship covering tuition, fees, books | No | Qualified education expense |
| Scholarship covering room and board | Yes | Has always been taxable |
| Alston academic awards, up to $5,980 | Generally yes | Reported by the school |
The Self Employment Tax
NIL income is not a wage. The player is an independent contractor, and independent contractors pay both halves of Social Security and Medicare, a combined 15.3 percent: 12.4 percent for Social Security on earnings up to $184,500 in 2026 and 2.9 percent for Medicare with no cap. It is applied to 92.35 percent of net profit and is owed on top of ordinary income tax, before any standard deduction. A player with $20,000 of net NIL profit and no other income owes about $2,800 in self employment tax before income tax is calculated, and the obligation to file begins at $400 of net earnings.
No Withholding
A brand or collective paying an athlete does not withhold taxes the way an employer does. Payers who send $600 or more in a year have issued a 1099 form, but the income is taxable whether or not a form arrives, and the IRS expects quarterly estimated payments in April, June, September and January from anyone who will owe $1,000 or more. A player who spends the money as it comes in and files in April without having set anything aside is the most common NIL tax story, and it is why most schools now run financial literacy sessions and why agents build tax reserves into their advice.
State Taxes
Nine states have no income tax, including Texas, Florida and Tennessee, which is a recruiting talking point at schools in those states. Everywhere else NIL income is taxed by the player’s state of residence, and the state where the work was performed may also claim a share, the same way professional athletes pay tax in every state they play in. An appearance in another state, or a deal with a company based elsewhere, can create a filing obligation there. Residency for a student who lives on campus in one state and lists a home address in another is its own question.
What Can Be Deducted
Because NIL is business income, the costs of earning it reduce the taxable amount: agent and marketing fees, which typically run 10 to 20 percent, training and equipment tied to the endorsement work, travel to appearances, the home office and phone used to produce content, and professional fees for accountants and lawyers. Some athletes form an LLC or S corporation to hold the income, which can reduce self employment tax above a certain level but adds cost and paperwork. Whether it makes sense depends on the number, and the number for most players does not justify it.
Revenue Sharing Is Different
Money from the school under the House settlement is also taxable, but how it is reported depends on the contract. Some schools treat revenue share payments as compensation reported on a W-2 with withholding; others structure them as licensing payments closer to NIL. The player should know which, because it determines whether tax has already come out. Our page on revenue sharing covers the school side, and our page on Alston money covers the academic award.
The Financial Aid Effect
The FAFSA uses income from two years before the academic year, so a large NIL year as a sophomore reduces need based aid as a senior. For a scholarship football player at a Power Four school this rarely matters, because the athletic scholarship is not need based. For a walk on or a partial scholarship player relying on Pell Grants, a $20,000 NIL year can cost aid later. International students face a separate problem: most student visas restrict off campus work, and NIL income earned in the United States can jeopardise status, which is why many international athletes route deals through activity performed abroad.
The Bottom Line
College athletes pay taxes on NIL money, and more of it than most expect: federal and state income tax plus a 15.3 percent self employment tax, with nothing withheld and quarterly estimates due. Tuition scholarships stay tax free, room and board and revenue share payments do not, and a big NIL year shows up on the FAFSA two years later. This page is general information, not tax advice; a player earning real money should have an accountant before the first cheque clears. Our page on how much players make puts the numbers in context.