Understanding #NIL Tax Implications for High School Student-Athletes

One of the many observations of the early days of Name, Image and Likeness is the realization that we are dealing with young people who have very limited understanding of business, finance and marketing. These student athletes, whether they are in college or now in High School have very limited understanding of the choices and decisions they make and how those may have much larger implications. One that I am keenly concerned about its finances and tax implications for High School student-athletes and there families. Here are a couple of Tax considerations that High School families should be considering:

Tax TipS for High School #NIL

NIL creates an opportunity for athletes to learn the ropes about personal finance, budgeting, and taxation at a young age. Consider some basic ground rules and potential issues:

  • High School athletes are not employees of the school and are generally not employees of the companies paying the athlete for NIL. Generally, High School athletes will be considered independent contractors by the companies who sign them to NIL deals.
  • Most, if not all, payments an High School athlete receives will have no income taxes withheld, which means if the payment is taxable, tax will be due when the athlete’s tax return is filed. Athletes should budget accordingly for cash-flow purposes, as federal, state, and potentially local income tax may be owed before April 15.
  • Compensation may be in the form of cash or non-cash items such as clothing, food, sports equipment, gifts, and discounts on products. Non-cash compensation is also taxable income.
  • State and local tax issues may arise if an athlete resides in one state but attends school in another state — or perform services such as sponsorships, promotions, or events in other states. Those student athletes in boarder states that do or don’t allow NIL need to pay close attention.
  • Depending on the size of payments the athlete receives, they may need to consider making quarterly estimated tax payments throughout the year to avoid interest and penalties.
  • Income received for use of NIL could jeopardize an NCAA athlete’s eligibility for need-based financial aid.
  • Please consult a CPA or tax planning professional for all your business and tax needs.

Again these are just a handful of tips for High School student-athletes and families to consider around Name, Image and Likeness. For more information on how we help schools becoming educated on NIL, please check out http://www.thebedfordagency.com

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