College and high school athletes earning money from their name, image, and likeness are increasingly treated as self-employed business owners, and one tax professional warns that many young players and their families are unprepared for the income and self-employment tax bills that follow.
NIL income makes athletes business owners
The new era of name, image, and likeness (NIL) deals has turned many college athletes into small business owners, and the tax obligations often catch them off guard. Most NIL arrangements classify athletes as independent contractors rather than employees, so they receive a Form 1099 with no tax withheld, a shift that many young adults do not expect.
“The IRS considers them a business owner, and they’re going to be filing a Schedule C on their tax return and reporting business income,” Jennifer Blackwood, managing principal of tax at PYA, told Checkpoint.
Athletes who have “probably never even paid tax,” she noted, are suddenly responsible for complex filings, including self-employment tax — an outcome that can be “a big surprise” as more players become subject to income tax.
The income is not limited to cash. Athletes can earn compensation for endorsements, social media, camps, and autographs, but they also owe tax on the fair market value of non-cash benefits such as merchandise and equipment. “I don’t think any 18-, 19-, or 20-year-old is going to suspect that they’re going to be taxed on merchandise, equipment, any of those things that they receive,” Blackwood said.
Revenue sharing raises W-2 questions
While most current NIL deals treat athletes as self-employed, the revenue-sharing agreements between universities and athletes that began in mid-2025 are creating “a bit of stir,” Blackwood said, and some observers expect those payments to be reported as wages on a Form W-2. For now, the treatment remains unsettled. Blackwood said some of her firm’s clients received 2025 revenue-sharing payments on Forms 1099, in part because many universities were not prepared to add athletes to payroll in the middle of the year.
Still, she expects the classification to shift. “I think ultimately we’re going to see them be on a W-2 because if they’re sharing revenue with the university, it kind of feels like the university is telling them what to do,” Blackwood said. A Form W-2 would generally bring income and payroll tax withholding, which could reduce the risk that athletes spend their earnings before setting aside money for taxes.
Blackwood expects the largest programs to lead the way. “The bigger schools are going to kind of set the example for the rest of them,” she said. Traditional endorsement deals with outside brands are likely to remain independent-contractor income.
Uneven payments, state taxes add complexity
For athletes who are paid without withholding, timing is often the biggest challenge. NIL payments can arrive before a season, in installments, or in a single large deposit, while estimated tax deadlines stay fixed. If an athlete has no adviser to help set money aside, “it’s going to be gone, and they’re going to be in shock when somebody tells them” the tax is due, Blackwood said.
The bill can be steep. Athletes are “looking at easily 30% off,” she said. Blackwood estimated that a $200,000 deal could generate about $60,000 in tax, though the figure varies with income, expenses, and circumstances. She said athletes can sometimes rely on prior-year safe-harbor rules or annualize income when payments arrive unevenly, but both approaches demand planning that first-time filers rarely grasp. “You’re trying to explain to pretty much a kid the safe-harbor rules and all this kind of thing that most adults don’t even understand,” she said.
State income tax adds another layer. Professional athletes already pay tax in the states where they compete based on “duty days,” and Blackwood expects states to eventually apply similar rules to college NIL income — something she called “on the horizon.” Athletes in states without an income tax, such as Tennessee, avoid that layer, while those in states like Georgia owe state tax on top of federal income and self-employment taxes.
Support needs to start before the first deal
Given the complexity, Blackwood stressed that the athletes who navigate the transition best build help around themselves before the first payment arrives. Universities, she argued, “need to have some sort of obligation” to tell athletes what they owe or “lead them to the right folks,” and tax professionals “need to do all we can to help educate” young earners.
Those questions are reaching athletes earlier. High school students and their families are already weighing NIL opportunities, Blackwood said, and some ask about the tax consequences while still choosing where to play, in some cases factoring in whether a state levies an income tax at all.
“The ones that are successful in holding that money back are just the ones that have that good support system,” Blackwood said, pointing to engaged parents and, in some cases, an accountant or wealth advisor. Those advocates matter, she said, because many young athletes do not grasp what signing a deal sets in motion.
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