Is NIL money taxable?

Last reviewed October 19, 2026

Yes. The IRS says NIL income is generally taxable, whether it arrives as cash, products, gift cards or services, and that it is reportable even when no Form 1099 or W-2 arrives. Pay for an athlete's own work is generally also subject to Social Security and Medicare taxes, and a child's earnings are the child's income, not the parent's.

What counts as NIL income?

The IRS defines NIL income as any money or other financial gain a student-athlete receives, in cash, property or services, from a deal that uses the athlete's name, image or likeness. Its list of sources includes:

• Revenue sharing paid by a college or university
• Brand endorsements and sponsorship deals
• Autograph fees and promotional or guest appearances
• Content creator and social media income
• Gifts, giveaways such as gift cards, and services received in kind
• Royalties

The House settlement, approved by a federal court on June 6, 2025, lets Division I programs share revenue directly with athletes, and the IRS counts that revenue sharing as NIL income.

How is NIL money taxed?

NIL income is subject to federal income tax. Pay for the athlete's own services is generally also subject to Social Security and Medicare taxes: withheld if the athlete is an employee, or paid as self-employment tax if the athlete is self-employed.

Whether an athlete is an employee depends on the facts, including how much control the school or company has over the athlete's services. Employees generally receive a Form W-2, with tax withheld from their pay. Independent contractors generally receive a Form 1099-NEC and no tax is withheld.

The self-employment tax rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. It applies when net earnings from self-employment are $400 or more, and it is figured on Schedule SE. Part of it, the employer-equivalent portion, is deductible when figuring adjusted gross income.

Which tax form will an athlete get for NIL income?

It depends on how the deal is set up. This table follows the IRS NIL page.

One deal can land in two rows. The IRS gives the example of a campaign that pays both a photo-shoot fee and a royalty for using the photo: the shoot fee is self-employment income on Schedule C, while the royalty goes on Schedule E and is not self-employment income.

Is free gear or product from a brand taxable?

Generally, yes. The IRS says non-cash NIL pay, such as merchandise, gift cards, haircuts and other personal services, is generally taxable, and calls it bartering. Under the IRS bartering rules, the fair market value of goods or services received is included in income in the year they are received.

Product deals can appear on Form 1099-NEC, and they are still income when no form arrives.

Does a dependent child file their own tax return for NIL income?

It depends on income. For 2025 returns, a single dependent who is under 65 and not blind generally has to file if any of these apply:

• Earned income was more than $15,750
• Unearned income was more than $1,350
• Gross income was more than the larger of $1,350, or earned income (up to $15,300) plus $450

A separate rule applies to self-employment. Anyone with net earnings from self-employment of at least $400 generally has to file, whatever their other income. For NIL pay reported as self-employment income, that $400 line sits far below the $15,750 earned-income figure.

Two more IRS rules are worth knowing:

• Money a child earns by performing services is the child's income, not the parent's, even if the parent has a legal right to the earnings or receives the money. If the child does not pay the tax due on that income, the parent is liable for it.
• If a child cannot file their own return, a parent, guardian or other legally responsible person files it for them. If the child cannot sign, the parent signs the child's name followed by "By (your signature), parent for minor child."

Does the kiddie tax apply to NIL money?

Generally not to pay for work. The "kiddie tax" (Form 8615) applies to a child's unearned income above $2,700 for 2025, which is taxed at the parent's rate if that rate is higher. It covers children under 18 at the end of the year, and children who are 18, or full-time students aged 19 to 23, whose earned income was not more than half of their own support. The IRS describes unearned income as generally all income other than salaries, wages and other pay for work the child actually performed. Pay for posts, appearances and other services is earned income.

Royalties are different. The Form 8615 instructions list royalties as unearned income, and the IRS NIL page treats payments only for the use of an athlete's name or photo as royalties. How those two rules fit together for a given deal is a question for a tax professional.

Parents can report a child's income on their own return with Form 8814 only when the child's only income is interest and dividends (including capital gain distributions), so the election does not cover NIL pay.

Can we still claim our child as a dependent?

NIL income can bear on this. To be a qualifying child, the child must not have provided more than half of their own support for the year, along with other tests such as age and residency. Publication 501 includes a worksheet for working through the support test.

Does NIL income affect financial aid?

It can. The IRS says NIL income is included in taxable income on the FAFSA and could affect the aid a student receives, including Pell Grants. The IRS suggests talking with the school's financial aid office or an advisor before accepting NIL income.

Are NIL expenses deductible?

Some can be. Self-employed athletes report income and expenses on Schedule C. To be deductible, a business expense must be both ordinary (common and accepted in that field of business) and necessary (helpful and appropriate for the business). When an expense is partly business and partly personal, the personal part is separated out.

The IRS suggests keeping receipts, purchase orders, travel logs and mileage logs for expenses tied to NIL income, because they may be deductible.

Is NIL money taxed by the state?

It can be, and the rules vary by state. The IRS points out that an athlete may owe state tax in each state where NIL income is earned, so it suggests keeping track of where NIL services are performed. Each state's revenue department publishes its own rules, and the IRS keeps a directory of state pages.

When are taxes on NIL income paid?

Self-employed athletes typically have no tax withheld from NIL income. The IRS says people generally make estimated tax payments with Form 1040-ES if they expect to owe $1,000 or more when they file. Underpaying can lead to a penalty.

For 2026, the Form 1040-ES due dates are April 15, June 15 and September 15, 2026, and January 15, 2027. The January payment is not required if the 2026 return is filed by February 1, 2027, with the full balance paid.

An exception can matter in a first year of NIL income. The IRS says estimated tax generally is not required for the current year when all three of these are true: the person had no tax liability for the prior year (total tax was zero, or no return was required), was a U.S. citizen or resident for that whole year, and that year covered 12 months. The exception covers only the estimated payments; any tax owed for the year is still due when the return is filed.

Does an LLC change how NIL money is taxed?

Not by default. The IRS treats a single-member LLC as disregarded from its owner for income tax, so the owner reports the business on Schedule C and pays self-employment tax the same way a sole proprietor does. An LLC can elect to be taxed as a corporation instead. Whether any election makes sense depends on the facts, which is a question for a tax professional.

For what an LLC can and cannot do for a college athlete, see our guide to NIL LLCs for student-athletes. For more on the default rules, see single-member LLC taxes.

Steps that follow the IRS's suggestions

Most of these follow the IRS's own suggestions. They are general information, not legal duties; what fits depends on each family's facts.

• Read how each deal pays. Services, name-only use and products are treated differently by the IRS.
• Keep a running log of the date, payer, cash amount or product value, and the state where the work happened.
• Handle the W-9 or W-4 up front. The IRS suggests completing these accurately and giving them to the payer before NIL income arrives.
• Keep receipts and mileage. The IRS lists these as records worth keeping.
• Check with the financial aid office before accepting a deal, as the IRS suggests.
• Put the estimated tax dates on the calendar if estimated payments apply.
• Bring the records to a tax professional. The IRS suggests talking with a CPA or tax professional before accepting an NIL contract or forming a business entity.

For students learning the basics of business money, see small business taxes and accounting basics for students.

Frequently asked questions

Is NIL money taxable if no 1099 arrives?

Yes. The IRS says all NIL income is reportable even if the payer does not issue a Form 1099 or W-2.

What is the Form 1099-NEC threshold for NIL payments in 2026?

A payer generally reports payments totaling $2,000 or more of cash, merchandise or services in kind on Form 1099-NEC. That threshold applies to payments received in 2026 and will be adjusted for inflation later.

Is revenue sharing from a school taxable?

The IRS lists revenue sharing from a college or university as NIL income. For NIL pay in general, the IRS says whether an athlete is an employee (Form W-2) or an independent contractor (Form 1099-NEC) turns on the facts, such as how much control the payer has.

Are high-school athletes' NIL earnings taxed the same way?

Generally, yes. The IRS filing thresholds for dependents depend on income, not on age or grade, apart from higher thresholds for people who are 65 or older or blind, and the $400 self-employment rule applies to anyone. Age does matter for the kiddie tax, which covers unearned income such as royalties for children under 18 and some older students.

Can a parent report a child's NIL income on the parent's return?

Generally no. The IRS says money a child earns by performing services is the child's income, even if a parent receives it, and Form 8814 covers only a child's interest and dividends.

Educational information, not legal or tax advice. LLCAttorney.com is not a law firm.

Sources

1. IRS, "Name, image and likeness income" (last reviewed or updated 14-Aug-2026). https://www.irs.gov/businesses/small-businesses-self-employed/name-image-and-likeness-income
2. IRS, "Self-employment tax (Social Security and Medicare taxes)" (27-Jun-2026). https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
3. IRS, "Estimated taxes" (25-Sep-2026). https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
4. IRS, Form 1040-ES (2026), "Estimated Tax for Individuals," Payment Due Dates. https://www.irs.gov/pub/irs-pdf/f1040es.pdf
5. IRS, Topic no. 420, "Bartering income" (08-Oct-2026). https://www.irs.gov/taxtopics/tc420
6. IRS, Publication 501 (2025), "Dependents, Standard Deduction, and Filing Information" (30-Apr-2026). https://www.irs.gov/publications/p501
7. IRS, Instructions for Form 8615 (2025), "Tax for Certain Children Who Have Unearned Income." https://www.irs.gov/instructions/i8615
8. IRS, Topic no. 553, "Tax on a child's investment and other unearned income (kiddie tax)" (24-Sep-2026). https://www.irs.gov/taxtopics/tc553
9. IRS, Publication 334 (2025), "Tax Guide for Small Business," Business Expenses. https://www.irs.gov/publications/p334
10. IRS, "Single member limited liability companies" (27-Jul-2026). https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-companies
11. IRS, "State government websites" (11-Oct-2026). https://www.irs.gov/businesses/small-businesses-self-employed/state-government-websites
12. U.S. District Court, N.D. Cal., House v. NCAA, No. 4:20-cv-03919-CW, Dkt. 979, order granting final settlement approval, filed June 6, 2025 (same source as the live /nil-llc page). https://storage.courtlistener.com/recap/gov.uscourts.cand.360907/gov.uscourts.cand.360907.979.0_2.pdf