We’ve entered a new era of college athletics. After stunning shifts in NCAA policy in the middle of 2021, the door has been opened for countless college student-athletes to make money with sponsorships and advertising based on their name, image, and likeness. 

This is a dramatic change for schools, advertisers, and, most of all, student-athletes. This new freedom allows many student-athletes to seek compensation for the use of their image. However, with a significant boost in income, NIL deals also bring a related increase in tax obligations.

Many young athletes may be new to self-employment income and may be unprepared to handle the accounting issues that come with it. Name, image, likeness (NIL) deals may bring significant income streams for particularly well-known athletes. 

This is an excellent opportunity for these student-athletes, but it comes with its fair share of risk unless they are well-supported by professionals who can guide them through the issues. 

What Is the New Policy on Name, Image, and Likeness Deals for NCAA Student-Athletes?

The National Collegiate Athletic Association long had stringent policies limiting any compensation students could receive from advertisers or the schools themselves, whether in money or goods. 

However, after the Supreme Court ruled firmly against the NCAA on a distinct but related matter, the NCAA decided to relax its restrictions and allow students to make money off their name, image, and likeness; states and schools can regulate these NIL activities. Schools still may not provide gifts or compensation to attract students, but students are free to make money from deals with other businesses. 

Consistent national laws regulating or limiting these sorts of deals may be forthcoming. For now, the NCAA is simply lifting the lid and trusting states and individual schools to do what they can to protect students. 

Students are also allowed, and in many cases encouraged, to seek out professional providers to help them handle their sponsorship deals. Chief among NCAA student-athletes’ list of priorities should be finding a reliable and trusted accountant who can provide tax and accounting advice for their new income streams. 

How Do NIL Deals Work for NCAA Student-Athletes?

Name, image, and likeness deals are agreements between a student-athlete and a brand. The student-athlete leverages their persona to effectively license the use of their name, image, and likeness to support a particular product, service, or business. This might mean signing up to participate in conventional advertising, or it could be as simple as receiving and using specially branded products. 

Anything that involves a student-athlete’s name, image, or likeness may be fair game. It could be the student-athlete’s image appearing on a product or commercial, featuring a new product in a series of social media posts, or making an appearance at a special event. 

New Management and Accounting Challenges for NCAA Student-Athletes

As wonderful an opportunity as this is for many successful student-athletes, there are a lot of new obligations they’re facing in this environment. For one thing, there are countless brands eager to license a student-athlete’s image that may not hesitate to take advantage of a young student-athlete who’s never negotiated a business deal before. On top of this, there are several financial matters to take into consideration as well. 

Managing and Recording Income

Although many might not realize it, these student-athletes have just become business owners, and their primary product is their own name, image, and likeness. 

Income earned through these NIL deals qualifies as self-employment income, which means student-athletes are independent contractors who must track their own finances and handle their own taxes. Unfortunately, most student-athletes are likely not experts in small business bookkeeping

Student-athletes must keep track of their income or hire someone else to manage their accounting. These can be large transactions, so there may be significant tax or business consequences for failing to keep track of an agreement or paying the necessary taxes on it. 

Paying and Filing Taxes

As small business owners with significant income, student-athletes will be required to calculate and pay quarterly estimated taxes on their income.

There are consequences for failing to properly pay estimated taxes according to their quarterly deadlines, which would mean paying even more than previously necessary on annual tax returns. 

Multiple expanded income streams will also make tax returns an ordeal for many student-athletes. With their specialized business finances, they would benefit from professional and ongoing accounting help.

Without getting professional help for their returns, many student-athletes may find themselves losing significant money during tax season. If they have already spent most of their income, that could mean severe debt issues for student-athletes who suddenly have much less money than they thought they did. 

Business Expense Deductions

Student-athletes can save money on their taxes by keeping track of eligible business expenses they can claim as tax deductions. However, if they’re not prepared to keep a careful record of their expenses and consider what does or doesn’t legally count as a deductible expense, they are likely to face trouble here as well. 

Tax law is complicated, and tax law in these specialized and high-dollar issues is especially complicated. Student-athletes need professional support to help protect themselves and their families from manipulative advertisers and cryptic tax laws. 

1-800Accountant Can Help NCAA Student-Athletes Navigate the Financial Aspects of NIL Deals 

NCAA Student-Athletes looking for professional help to navigate the financial aspects of any prospective NIL deals should look no further than 1-800Accountant. Count on this team for smart tax advice and compassionate support for young business owner student-athletes. 

You’re getting into a new game, and the stakes are high. If you start playing without knowing all the rules, things could go very wrong. Get the experts on your side and learn what you need to get ahead and protect yourself. 

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Written by Gabriella DeVille

Gabriella DeVille is a Tax Accountant in the Central team at 1-800Accountant. Prior to joining 1-800Accountant, Gabriella worked at a few s...