What High School Athletes and Parents Should Know About NIL and Taxes

Disclaimer: This post is for general educational purposes only and is not tax advice. Every athlete's situation is different. Tax laws are also constantly changing, risking some of this material to be potentially outdated since it was originally posted. Please consult a qualified tax professional for latest rules and guidance specific to your circumstances.

One of the least talked about aspects of NIL is the tax side of it. NIL and taxes feel irrelevant until it suddenly isn't…and by then, being a step ahead makes all the difference. Whether your athlete is exploring opportunities now or planning to pursue NIL in college, this is worth understanding early.

Let's say an athlete posts a photo for a local brand, gets paid $300 for it, and moves on with their week. No big deal, right? Maybe not today. But here's the thing — the IRS sees that $300 differently than the athlete does. And the families who understand that early are the ones who avoid headaches down the road.

Consider this your head start.

NIL Income Isn't Like Getting Paid at a Regular Job

Think about any hustle a high schooler runs on their own — mowing lawns in the neighborhood, refereeing youth soccer games on weekends, selling sneakers online. On the money they make, no one's withholding taxes before it hits their pocket. That responsibility is on them.

NIL income works the same way. When a brand pays an athlete for a post, an appearance, or a campaign, that athlete is functioning as an independent contractor — meaning they're working for themselves, not as an employee of a company that handles their taxes for them. Athletes receive the full payment with no taxes withheld. As a result, it’s on the athlete (and their family) to know what to do next.

That's not a bad (or scary) thing. It's just different…and knowing it upfront changes how you approach NIL from the start.

When Does An Athlete Owe Taxes?

Here's one of the most common misconceptions in NIL: a lot of athletes and parents think that if a brand doesn't send a tax form, income doesn't have to be reported. That's not how it works.

$600 is the threshold that requires a brand to send a 1099-NEC form to the athlete (this form helps the athlete and brand report the same payment amount on their tax returns). But it's not the threshold for the athlete to owe taxes. If an athlete earns $400 or more in net self-employment income (from NIL or anything else they're doing on their own) they're generally required to file a tax return and pay self-employment tax. That $400 number is the one most people miss. And note that $400 threshold is based on net income (net income = total payments received – related expenses*).

*See below for additional details on what expenses can be deducted for NIL purposes.

The bottom line: even smaller deals add up, and total income across multiple deals matters more than any single payment. Keeping track from the very first deal is a habit worth building from the beginning.

It's also worth noting that while the NJSIAA permits NIL activity for high school athletes in New Jersey, official tax guidance for athletes is limited. That responsibility falls on the athlete and their family — which is exactly why understanding this early matters.

"Free" Isn't Always Free

Many NIL deals get paid out in cash. However, many don’t. When NIL compensation doesn't come as cash, that's where things get tricky.

NIL deals can also pay athletes in free products, gear, gift cards, and other non-cash perks. As far as the IRS is concerned, these are all generally considered taxable income at their fair market value (fair market value = the price the brand typically sells the item for).

A few examples:

• A brand sends athlete $400 worth of sneakers in exchange for a post — that's $400 of taxable income

• A $150 gift card for a product review reel? Same thing — treated just like $150 in cash

• Free gear, apparel, or equipment follows the same rule

One practical thing to keep in mind: if an athlete is receiving products or gift cards as part of deals, it helps to also have some cash deals in the mix. Non-cash compensation creates a real tax liability, but gives the athlete no actual cash to pay it with. Having cash from other deals makes handling those situations much easier.

The key takeaway: the format of the payment doesn't change whether it's taxable. If it has value, it counts.

What Parents Need to Understand

This section is for the parents reading along. Because while your athlete may be the one doing the deal, the financial picture is still very much a family one.

A few things worth knowing:

• An athlete can still be claimed as a dependent on a parent's tax return even if they file their own NIL return. These aren't mutually exclusive — but they do need to be coordinated correctly. A tax professional can help you navigate how both returns should be structured.

• Until your athlete turns 18, you're likely involved in this whether you intended to be or not. Contracts, payments, and tax implications don't pause for age. Be in the room for financial conversations, not just the sports ones.

• Think of yourself as the CFO of your athlete's early NIL career. Not controlling it but supporting it. Helping track what's coming in, what form it takes, and what your obligations are. This shouldn’t be seen as a burden, but instead as good parenting…and good business.

Habits to Build Now (Even Before Any Deals Happen)

The athletes and families who handle NIL income well aren't doing anything complicated. They're just doing a few simple things consistently.

Here's what that looks like:

• Set aside 20-30% of every cash payment immediately. Open a separate savings account and treat it as untouchable until tax season. This one habit prevents the most common NIL tax headache.

• Keep a running record of everything received. A simple Excel file and Google Drive folder works. Log every deal (cash payments, products, gift cards) with the date, brand, and value. Do it when the deal happens, not months later.

• Save every agreement and receipt. Contracts, emails confirming a deal, photos of products received — all of it. Paper trails protect athletes and simplify everything come tax time.

• Track deductible expenses. Things like a camera for content creation, travel expenses to an appearance, or equipment used specifically for NIL work may be deductible. Keep records of those costs too.

  
  

Questions to Bring to a Tax Professional

Not every accountant or tax preparer has experience with NIL. When you're ready to find one, look for someone who has worked with 1099 contractors, self-employed individuals, or athletes specifically.

Here are questions worth asking:

• Have you worked with high school or college athletes, or 1099 contractors before?

• How do NJ state taxes apply to a minor's self-employment income?

• Can my child still be claimed as a dependent on our return if they file their own?

• What expenses related to content creation or NIL activity can be deducted?

• How should we handle non-cash compensation like gear or gift cards?

• (For Athletes going to college in a different state) How do we handle NIL deals done outside of NJ?

The Big Picture

NIL is a real opportunity — for income, for brand building, for developing skills that matter long after sports. But like any opportunity, it comes with responsibility. The financial side isn't something to figure out later. It's part of taking NIL seriously from the beginning.

The athletes who approach NIL with that mindset (understanding not just the opportunity but what it requires of them) are the ones who benefit most from it. And the families who support that approach are the ones who help make it sustainable.

You don't need to have all the answers today. But knowing the right questions to ask is a head start most people don't give themselves.

At Jrzy Elite, we believe education is the foundation of every great NIL experience. If you have questions about navigating NIL (from the opportunity side to the responsibility side) we're here to help.

Save this flowchart to help guide you through the NIL tax process.