Every year, families go through their first NIL tax season the same way. The checks came in, they were deposited, things got spent, and then April arrives with a bill nobody planned for. This is not a failure of character. It is a failure of information. Nobody told them what NIL income actually is — and what it requires.

Let me tell you plainly right now so your family does not find out the hard way.

NIL Income Is Self Employment Income

When your athlete receives payment for a NIL deal — an endorsement, an appearance, a social media post, a training camp — that money is classified as self employment income by the IRS. Nobody is withholding taxes from it. No W-2 is coming. Your athlete will receive a 1099 form for any payment over six hundred dollars from a single source, and they owe taxes on every dollar regardless of whether a 1099 was issued.

Self employment income is subject to both income tax and self employment tax, which covers Social Security and Medicare. Depending on your athlete's total earnings and your household's overall tax situation, the combined rate can be significant.Many families are surprised to learn they owe twenty five to thirty percent of their NIL income to the IRS.

Quarterly Estimated Taxes

Here is the part most families miss entirely. When you earn self employment income, the IRS expects you to pay taxes throughout the year — not just in April. These are called quarterly estimated tax payments and they are due in April, June, September, and January. If your athlete earns NIL income and does not make these payments, the IRS will charge penalties on top of the taxes owed.

The first time I explain this to a family, there is almost always a long pause. Nobody told them. Not the brand, not the school, not the agent who negotiated the deal. They are sitting on money they have already spent, and now they owe a percentage of it to the federal government plus penalties for not paying quarterly.

The Right Structure Makes a Difference

One of the most important decisions a family can make before the first NIL check arrives is whether to establish a business entity for the athlete. Depending on the volume of earnings and the nature of the deals, an LLC or S-corporation structure can provide both organizational clarity and potential tax advantages. It also signals to brands and agents that your athlete is operating professionally — which matters in negotiations.

This is not a decision to make alone or based on a quick internet search. It depends on your state, your athlete's earnings, your household tax situation, and the specific types of NIL deals involved. But it is a conversation worth having before the money starts moving, not after.

Deductions Families Do Not Know to Take

The other side of the tax conversation is deductions. Because NIL income is self employment income, your athlete may be able to deduct legitimate business expenses — equipment used to create content, mileage for appearances, a portion of a phone bill used for business purposes, professional fees for attorneys or advisors who reviewed contracts. These deductions reduce the taxable income, which reduces what is owed.

Most families leave these deductions on the table simply because nobody told them they existed. A proper tax structure with good record keeping from day one captures these deductions and puts real money back in your family's pocket.

What to Do Right Now

If your athlete is currently earning NIL income and you do not have a tax plan in place, the first step is to open a dedicated account for NIL income if you have not already. Keep the money separate from personal accounts so it can be tracked. Set aside a consistent percentage of every payment for taxes — a general starting point is twenty five to thirty percent, though your actual obligation may vary. Begin keeping records of any business related expenses.

Then schedule a conversation with someone who can look at your full picture and help you build the right structure. That is exactly what we do. And the earlier that conversation happens, the better position your family will be in.

"Most families find out what they owe at tax time — when it is already too late to do anything about it. The conversation needs to happen before the first check arrives." — Marty McNair