One Big Beautiful Bill Act’s Impact on NIL Student-Athletes
The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, marks a significant shift in federal tax policy. While OBBBA is best known for its “No Tax on Tips” and “No Tax on Overtime” provisions, several lesser-known sections directly affect college athletes earning income through Name, Image, and Likeness (NIL) deals.
Since 2021, NCAA student-athletes have been allowed to receive compensation for their NIL from third parties outside their colleges and universities. As the NIL landscape continues to evolve—shaped by NCAA rules and IRS guidance—the OBBBA introduces new tax implications that student-athletes should understand.
NIL Income: 1099 vs. W-2 Classification
Most student-athletes receiving NIL compensation are classified as independent contractors, meaning they receive Form 1099s to report income. Unlike W-2 employees, 1099 contractors must pay the full 15.3% self-employment tax, which covers Social Security and Medicare (FICA) contributions.
In rare cases, however, student-athletes may be treated as W-2 employees—typically when NIL opportunities are recurring and structured like employment. If classified as W-2, athletes would have taxes withheld by the payer and may lose access to certain deductions.
Note: While W-2 classification is currently uncommon, future developments—such as the House v. NCAA settlement —may lead colleges and universities to pay student-athletes as employees. This could result in broader W-2 classification across the NIL landscape.
Tax Provisions Affecting NIL Student-Athletes
Business Expense Deductions for 1099 NIL Athletes
Student-athletes classified as 1099 contractors can deduct ordinary and necessary business expenses related to NIL activities. These may include:
- Agent fees
- Travel and lodging
- Marketing and advertising
- Equipment and supplies
These deductions help reduce taxable income and are a key advantage of 1099 status.
No Deductions for W-2 NIL Athletes
Under the OBBBA, miscellaneous itemized deductions are permanently suspended. As a result, W-2 student-athletes cannot deduct unreimbursed business expenses such as:
- Agent fees
- Training and coaching costs
- Travel expenses
- Tax preparation and advisory fees
- NIL-related clothing and accessories
While these expenses may be reimbursed tax-free if properly documented, most will go unreimbursed—making W-2 classification less favorable from a tax perspective.
Increased SALT Deduction Cap
The OBBBA temporarily raises the State and Local Tax (SALT) deduction cap from $10,000 to $40,000, starting in 2025. This allows student-athletes to deduct more of their state and local income, sales, and property taxes on federal returns.
- Full $40,000 deduction applies to income below $500,000
- Reduced deduction for income between $500,000 and $600,000
- Reverts to $10,000 cap for income above $600,000
This change offers significant tax relief for many NIL-earning athletes.
Higher Form 1099 Reporting Threshold
Starting in 2026, the threshold for issuing Form 1099s increases from $600 to $2,000. This means student-athletes won’t need to issue 1099s for small payments to freelancers (e.g., videographers or social media consultants), reducing administrative burden and allowing more focus on training and brand-building.
How Milton Law Group Supports NIL Athletes
Whether classified as 1099 or W-2, student-athletes earning NIL income must navigate complex tax rules. Milton Law Group’s NIL tax experts provide strategic guidance to help athletes:
- Maximize NIL earnings
- Minimize tax liabilities
- Stay compliant with evolving federal tax laws
Contact Milton Law Group today to ensure your NIL tax strategy is optimized under the latest OBBBA provisions.