If a Aiken college athlete signs an NIL deal, the IRS treats them as a small business. That sentence catches a lot of athletes — and their parents — by surprise. This guide explains what taxes apply to NIL income, what paperwork to expect, and what to do before the money lands in the bank account.
The headline: NIL income is taxable
There is no NIL-specific tax exemption. Money an athlete earns from endorsements, social media posts, paid appearances, autograph signings, or camps is ordinary taxable income. It also counts for things like Pell Grant calculations and FAFSA the following year, which is a separate conversation worth having with the financial aid office.
You are probably self-employed for tax purposes
When a business pays an athlete for an endorsement, the business is hiring an independent contractor — not an employee. That means:
- No taxes are withheld. The check comes in at face value; nobody is taking out federal income tax, state income tax, or payroll taxes for you.
- You owe self-employment tax. That’s 15.3% on net earnings — 12.4% Social Security plus 2.9% Medicare. This is on top of federal and state income tax.
- You owe federal income tax. Your NIL income stacks on top of any other income (scholarship money treated as taxable, summer job, etc.) and is taxed at your marginal federal rate.
- You owe South Carolina state income tax. Rates and brackets are at the SC Department of Revenue.
The practical effect: when an athlete signs a deal for $5,000, the actual take-home after federal income tax, self-employment tax, and SC income tax is often closer to $3,000–$3,500. Pretending the gross is yours is the most common NIL tax mistake.
What paperwork to expect
- Form W-9. The paying business will ask you to fill this out before they cut a check. It’s how they get your Social Security number or EIN for their records.
- Form 1099-NEC. If a single payer pays you $600 or more in a calendar year, they’re required to send you and the IRS a 1099-NEC by January 31. Save every one.
- Form 1099-K. If you’re paid through a platform (PayPal, Venmo for business, a brand-deal marketplace), the platform may issue a 1099-K. Don’t double-count income that appears on both a 1099-NEC and a 1099-K.
- Schedule C and Schedule SE. When you file your federal return, NIL income goes on Schedule C (business income) and self-employment tax is calculated on Schedule SE.
Quarterly estimated taxes — the part nobody warns you about
If you owe more than $1,000 in federal tax beyond what’s withheld, the IRS expects quarterly estimated payments — April 15, June 15, September 15, and the following January 15. Miss them and you owe penalties even if you pay in full on April 15 of the following year.
A practical first-year approach: take 30% of every NIL payment as it lands and move it to a separate savings account. That’s your tax money. It is not yours to spend. When the quarterly deadline hits, you have the money to pay.
Deductions are real — track them
Self-employed athletes can deduct ordinary business expenses against NIL income. The big categories:
- Equipment used to produce content (camera, lighting, microphone, editing software).
- Mileage to NIL appearances and shoots — IRS standard mileage rate.
- Phone and internet — the business-use portion only.
- Professional fees — agent commissions, attorney contract reviews, accountant fees.
- Travel for paid appearances when the trip is for the deal.
Keep receipts. Keep a mileage log. The IRS does not accept “I think I drove about that much” if it audits.
A simple system
A starting framework for any Aiken college athlete doing NIL:
- Open a separate bank account just for NIL income and expenses.
- As each payment lands, transfer 30% to a separate “taxes” savings account.
- Track every business expense in a spreadsheet or a free tool like Wave or QuickBooks Self-Employed.
- Hire a tax preparer — not TurboTax — for your first NIL year. An accountant who handles small businesses costs $300–$600 and will pay for themselves the first time they catch a deduction or avoid a penalty.
What this is not
This is general information, not tax advice. Tax law changes, individual situations vary, and Aiken athletes weighing real money should talk to a CPA or enrolled agent before April 15. HEREAiken can connect athletes with verified local tax professionals through the HEREAiken Business Directory.