Winston CPA Group
Student athletes & their parents have lots of questions about the money side of NIL deals. Do you have to file taxes? How much money do you actually get? What happens to financial aid with NIL deals?
Aside from NCAA rules, many states have their own rules about Name Image Likeness deals. Know the requirements for your state and what you'll need to do to comply with all Name Image and Likeness rules.
Entering into a Name Image and Likeness (NIL) contract means that you are an entrepreneur and must handle your business accordingly. Here's a checklist of things you need to do BEFORE you sign your first NIL deal.
Here's the common questions we get about NIL deals...
What is Name/Image/Likeness (NIL) contract?
As of July 1, 2021, the NCAA’s NIL policy changed allowing athletes to make money from their image or name. According to the NCAA’s policy, student-athletes can engage in NIL activities that are consistent with state laws where the school is located.
How do student athletes get NIL deals?
There are many different NIL deals available to choose from. The most popular NIL deals are sponsorships and social media deals. If an athlete has an expert skill he or she may have the potential to offer industry-related knowledge through marketing. Network.com is a useful resource that has a digital marketplace that lists tons of platforms, agencies, apps, marketing companies, and other NIL opportunities athletes can take advantage of.
How much do student athletes get paid from NIL contracts?
Business Insider states, some athletes scored deals worth five or six figures, yet many student-athletes will go on to work with local businesses or one-off marking deals. Some companies are leaning toward the micro-influencer marketing trend, which allows them to hire more than one player for a campaign. Payouts from these deals may include free products, gift cards, or small cash payments. These may not be six-figure deals; however, promoting smaller deals appears to be more genuine and may go a long way in a student-athlete career.
What happens to a student athlete’s financial aid if they have NIL contracts?
Income earned from NIL will be considered additional taxable income to students and should be reported on the FAFSA. If income increased, this could reduce the need-based aid. Non-cash NIL awards would be considered taxable income as well, and may affect a student's Pell grant award, but would not affect cash flow.
Which student athletes are eligible for NIL deals?
The NCAA's new rules ban pay-for-play based on performance. Additionally, NIL compensation may not be contingent on a recruit enrolling at a particular school. Ultimately all student-athletes in college and some high schools in the US are eligible for NIL deals, regardless of performance.
Do student athletes get free stuff with NIL deals?
Yes, some NIL deals offer free products or services. There are NIL deals that offer compensation such as free hydration packets, energy gummies, sports drinks, or sparkling water. While others involved protein powder or supplements. Athletes have received pairs of shoes and shoe insoles, headphones and hats, underwear and clothes, and even free meals.
What’s NOT allowed in NIL contracts?
Some of the most common things not allowed are listed below.
NIL activities related to gambling, marijuana, and adult entertainment.
“Pay-for-Play". You cannot be compensated based on athletic performance.
Wearing colors and logos from your school and team as part of the NIL deal.
Accepting gifts. All benefits must be tied to an exchange such as marketing or promoting.
Appearing in video games.
Do student athletes have to tell their schools about their NIL contract?
In short, yes! Student-athletes should report NIL activities to their school and be consistent with state law or school and conference requirements.
Can coaches or school officials help student athletes get NIL deals?
According to the NCAA, coaches can assist a student-athlete in a NIL through fundraising through appearances or providing autographed memorabilia. Below is a list of other things schools can do to help assist student-athletes.
Request donors provide funds to collectives and other NIL entities, but funds cannot be directed to a specific sport or student-athlete.
Through sponsorship agreements, schools can provide tickets or suites to NIL entities.
Can student athletes use agents to get NIL deals?
Yes. The NCAA allows student-athletes to use agents for NIL deals. Yet, an agent is not allowed to market for the athlete. An agent's main goal is to help the student-athlete handle the business side of their NIL transactions.
Do student athletes have to pay taxes on money from NIL deals
NIL deals come with many different forms of payments, all of which are considered taxable! Although traditional compensation is easier to understand when it comes to taxes, good services, and even cryptocurrency payments are subject to tax. Compensation to Student-athletes from NIL sponsorships is considered self-employed income if compensation for the year is $600 or above. This is why it is important to consult with a CPA for money management and tax planning advice.
For additional information on NIL deals please visit: https://www.winstoncpagroup.com/post/nil-deals
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