NIL Taxes 101 for Parents
NIL income is taxable income — and unlike a W-2 job, no taxes are withheld. Your teen athlete will owe both income tax AND self-employment tax (~15.3%) on every dollar earned.
Key NIL tax facts every parent should know
- Brands typically issue a 1099-NEC if they pay $600+ in a year
- Free product counts as taxable income at fair market value
- Your athlete may need to file their own return, separate from yours
- Quarterly estimated taxes may be required if they expect to owe $1,000+
- State income tax may also apply, depending on where you live
This is general education — always consult a CPA for your specific situation.
Frequently asked questions about NIL taxes
Is NIL income taxable?
Yes. NIL income is fully taxable as self-employment income. Unlike a W-2 job, no taxes are withheld from NIL payments — your athlete is responsible for paying federal, state, and self-employment taxes directly.
Will my high school athlete get a 1099 for NIL deals?
Brands are required to issue a 1099-NEC for any payee they pay $600 or more in a calendar year. Your athlete may receive multiple 1099s — and is still responsible for reporting all NIL income, even from brands that don't send one.
What is self-employment tax and why does my athlete owe it?
Self-employment tax is a 15.3% tax that covers Social Security and Medicare contributions for self-employed workers. Because NIL income isn't a W-2 wage, your athlete pays both the employee and employer halves themselves.
Does my athlete have to file their own tax return?
Usually yes. Once a dependent has more than $400 in self-employment income, they're required to file their own federal return, separate from the parents' return — even if they're under 18.
Are quarterly estimated taxes required for NIL income?
If your athlete expects to owe $1,000 or more in federal tax for the year, the IRS generally requires quarterly estimated payments in April, June, September, and January. Skipping them can trigger underpayment penalties.
Does free product from a brand count as taxable NIL income?
Yes. The IRS treats free product (gear, apparel, equipment, free meals, free training) as taxable income at fair market value. Your athlete should track these in addition to cash payments.
Does NIL income affect my family's tax return?
It can. NIL income belongs to your athlete, but it can affect dependency, the kiddie tax, and certain credits. A CPA familiar with teen self-employment income can help you avoid surprises.
What records should we keep for NIL taxes?
Keep every contract, every 1099, every payment confirmation, every receipt for business expenses, and a simple ledger of cash and free-product income. Save them for at least three years after filing.