If you are a college athlete (US or foreign citizen) participating in NIL (name, image, and likeness) activities, you will need to file US taxes. That’s in addition to studying, practicing, competing, and earning income NIL related.
Whether you have previously paid income taxes or are filing your first return due to NIL payments, we have the information you need; Plus, we answer questions about how these rules apply to international student-athletes. Check out our NIL tax guide for international student-athletes!
International students and NIL taxes
You do not have to be a US citizen to benefit from the NIL income rules. International students may also be eligible for NIL income based on visa type and state or university guidelines.
Do international students pay NIL tax?
Yes. Generally, if you are from another country and receive payments from NIL activities in the US, you will have to pay tax on the income earned. Non-residents must report all income, including NIL payments, to the Internal Revenue Service (IRS), regardless of immigration status. (Hint: You can determine your official status here.) You will generally pay state and federal taxes. It is important to make sure that you are authorized for the type of work based on your visa type.
How do non-residents file taxes?
All non-residents who are required to file a personal income tax return must use Form 1040-NR, U.S. Nonresident Alien Income Tax Return.
To complete this form correctly and with all the necessary information, you will need a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). This is a tax processing number issued by the IRS for those who need a US Taxpayer Identification Number (such as an SSN) but are not eligible to receive one.
Be sure to have your address, passport, income documents, and forms handy when you file your nonresident tax return.
Are there deductions or refunds available?
Regardless of whether you earned income during your time in the US, if you are a non-resident temporarily residing in the US, you will need to file what is known as Form 8843. Form 8843 is an information return and you should not be confused with an income statement. You must file Form 8843 if you were present in the US during the previous tax year, are a nonresident alien, and are in the US on an F-1, J-1, F-2, or J visa -2.
You may still be able to claim deductions to help reduce your effectively connected taxable income. Nonresident aliens may take certain itemized deductions if they receive income actually related to their trade or business in the United States.
You can also get a tax refund when you finish filing your taxes. This is money that the state or federal government has already taken out of your pay and is now giving it back to you because it was more than you owed.
The NIL Summary
Technically, everyone has a name, a picture, and a lookalike, but for student-athletes, this is your chance to make money off of YOU and what makes you.
What are NIL rules and who makes them?
The NIL rules refer to the right and ability of a college athlete to receive payment for certain activities or performances. These activities may include:
- Appearances in clubs, schools or other places.
- Appearances at sporting events.
- Autograph signings.
- Content creation.
- Gifts and giveaways.
The National Collegiate Athletic Association (NCAA) is responsible for a recent change, called provisional policy NILwhich went into effect in mid-2021. Before this, you couldn’t monetize NIL activities, but thanks to the new policy, you can receive NIL payments without jeopardizing your NCAA eligibility.
Individual states and athletic programs may have their own NIL payment guidelines. NCAA policy does not override anything your university, program, or state has already implemented.
Where do the payments come from?
Although states and the NCAA set NIL rules, these entities are not responsible for offering or managing your payments. That money comes from whoever invited you to an event, hosted your content, or used your name and likeness.
How is NIL income taxed?
Most of the time, NIL income is taxable. That means you’ll need to report it on a tax return and give a portion to the federal and state governments.
For the 2022 tax year, NIL payments of $600 or more per year were likely reported on Form 1099-NEC. If payments were made through a third-party settlement organization (TPSO), think Venmo, PayPal, or CashApp, you had more than 200 transactions AND earned more than $20,000, you should have received a Form 1099-K. The IRS delayed the new threshold reporting requirements for a Form 1099-K for tax year 2022 to serve as a transition period. However, for tax year 2023 (the taxes you would normally do in 2024) and beyond, NIL payments in excess of $600 per year made through a TPSO will be reported on the 1099-K form.
These forms tell you how much money you earned and from what sources. Even if you don’t get these documents, you may still need to report NIL income for tax purposes. Once you have that information in hand, you can start filing your taxes to find out how much you owe (if anything).
When you receive NIL payments, you are generally considered an “independent contractor.” That puts you in the same boat as freelance writers, delivery guys, virtual assistants, and others who aren’t technically employed by a particular company. Since you work for yourself and made a deal with an organization or company, you are self-employed.
It’s important to know that self-employment tax is a little different than the tax you might have paid on traditional earnings as an employee. When you work for yourself, no one takes money out of your paycheck for you; instead, you are fully responsible for paying Social Security and Medicare taxes, culminating in a tax rate of 15.3%. That is in addition to state and federal taxes.
Other forms of payment
Not all NIL payments are cold, cold cash. For example, you may receive cryptocurrency instead, which is still taxed as self-employment income and reported on a Form 1099-NEC at the fair market value of the cryptocurrency at the time of receipt. When you sell that cryptocurrency, you also pay tax on any proceeds from the sale. This is called a “capital gains tax.” If a nonresident alien is physically present in the US for 183 days or more during the tax year, the US source capital gains tax rate is 30%.
In other cases, you may be paid with gifts or free products. This is also considered NIL income; it will simply include the fair market value of each item on your tax return if the business did not report it on a 1099.
Other Tax Tips
Whether you’re an international student or have lived in the US all your life, the truth is that taxes can be a bit intimidating, especially if it’s your first time filing a return. Here are some tips to help you navigate your tax situation beyond NIL payments:
Your parents’ taxes
If you are an international student athlete and your parents have US tax filing requirements, there is a chance that your parents may still be able to claim you as a dependent. That depends on a few factors, including the percentage of your support they cover. For example, if your NIL payments exceed the amount your parents provide, you may no longer be eligible for dependent status.
To learn more about these opportunities and responsibilities, see our NIL Parent Guide.
Deductions and Credits
Deductions and credits can reduce the amount of income that is considered taxable or reduce your overall tax payment.
Here are some of the more relevant business deductions that student-athletes could take in connection with their NIL agreements:
- Travel expenses, including airfare, car rental, and more.
- Marketing or website costs.
- Agency fees.
Scholarships and grants
According to the IRS, many Scholarships and grants they are tax free. That means you don’t have to report that money as income.
There are many ways to get tax help, especially if you are filing a return for the first time. For example, the IRS has many resources about tax forms, responsibilities, rates, marital statuses and more.
If you’re a US resident, you can use TurboTax to get your taxes done right, including automatic verification of all deductions, credits, and expenses you can claim. Non-residents can work with our friends at Sprintax.
Do you have NIL questions? we have answers
The new NIL policy allows student-athletes like you to earn money from things you were probably already doing. Just remember that on your road to fame and success, you will occasionally have to slow down and brush up on NIL tax requirements.
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