NIL-Paid Athletes: A Guide to the “Peak Earnings” Window

Earning income from Name, Image, and Likeness (NIL) before going pro is an exciting glimpse into what may be possible. But with that opportunity comes complexity, and without a plan, it's easy to make expensive mistakes.

Knowing how to manage that income can be what separates a short-term win from long-term success. With the right approach, early earnings can become the foundation for lasting financial security, wealth creation, and a meaningful legacy beyond the game.

Navigating the Realities of NIL Income

There's little question that NIL can fundamentally shift your financial trajectory. Endorsements, social media partnerships, licensing deals, and appearance fees can generate six- or even seven-figures - often before you have developed the experience or infrastructure to manage it effectively.

Unlike traditional professional earnings, NIL income tends to be:

• Front-loaded and uncertain, with limited visibility beyond college
• Highly variable, dependent on performance, marketability, and brand alignment
• Self-directed, placing responsibility for taxes, savings, and investment decisions squarely on the athlete

Poor decision-making, lifestyle inflation, and other financial pitfalls can erode your funds if you fail to plan correctly.

Imagine a Division I quarterback who signs several NIL deals during his sophomore year, earning $350,000. He spends the sudden influx of income freely on a new car, travel, and supporting friends and family. At tax time, he realizes he owes over $100,000 in federal and state taxes, plus potential penalties for not making quarterly estimated payments. Without having set aside sufficient funds, he's forced to liquidate investments and take on short-term debt to cover the obligation.

Maximizing the Peak Earnings Window

Embracing a disciplined, proactive approach during this compressed earning period can significantly alter your long-term financial trajectory. Your advisory team can help you with these goals:

• Build a durable financial framework that includes budgeting, saving (including using tax-advantaged retirement accounts for example), liquidity planning, and debt management to help translate your NIL income into lasting stability.
• Create a cash management plan that seeks to optimize yields for return potential, while providing liquidity for short-term needs and tax obligations.
• Implement a smart tax strategy that considers income, self-employment, and multistate taxes while using entity structuring and deductions to improve tax- efficiency.
• Invest in long-term growth with a diversified portfolio spanning asset classes, industries, and regions to help manage risk and build lasting wealth.
• Protect and grow your brand by aligning strategically with sponsors, reviewing contracts carefully, and positioning your personal brand for long-term success.
• Safeguard against career risks, including serious injury,with insurance planning tailored to your sport including disability and loss of value coverage.
• Leverage estate planning tools, such as irrevocable trusts, to help protect your assets and potentially shift appreciation out of your taxable estate.

Pro Tip: Athletes are responsible for reporting NIL contracts totaling $600 or more in the aggregate to the College Sports Commission (through its NIL Go platform) to ensure they are not "pay to play" deals.¹

NIL Tax Reporting: An Overview

Although earning income through NIL may be exciting, it still comes with important tax responsibilities. Knowing when to file, how to report different types of income, and any additional factors that may apply can help you avoid surprises.

Use the chart below as a quick guide to navigating key NIL-related tax rules.

Sources: https://www.irs.gov/businesses/small-businesses-self-employed/name-image-and-likeness-income | https://arbcpa.com/nil-income-and-taxes-what-college-athletes-and-families-need-to-know/

Beyond basic income reporting, NIL earnings can create additional tax and financial implications. Self-employment income is subject to a 15.3% tax (50% of which is deductible) and may require quarterly estimated payments if you expect to owe $1,000 or more.¹

Additionally, earning income across multiple states can trigger multi-state tax obligations, and NIL income may also impact dependency status and reduce financial aid eligibility since it must be reported on the FAFSA.

Frequently Asked Questions

Should NIL athletes create a business entity?
Your advisors can help you determine this answer based on your specific situation. In many cases forming LLC or similar entity can help manage income, streamline expenses, and potentially provide a layer of liability protection.

How much NIL income should I save or invest?
While it varies, a disciplined approach often involves saving and investing a significant portion (sometimes 50% or more) given the uncertainty of future earnings for athletes.

What are some of the biggest financial risks for NIL athletes?
Common risks include underestimating tax obligations, overspending, lack of diversification, and failing to plan for income volatility. Without structure, even significant earnings can dissipate quickly.

Is estate planning really necessary at this stage?
If you're earning substantial income, early planning can be highly beneficial. Techniques such as trusts can help protect assets, manage taxes, and establish a framework for future wealth transfer.

Who should athletes have on their team?
A well-rounded advisory group often includes an experienced financial advisor, certified public accountant (CPA), sports attorney, and agent, each working together to help protect your best interests, optimize your financial potential, and support long-term success.

Turning Early Earnings into Enduring Wealth

Although your "peak earnings" window as a college athlete may be short the income and the decisions you make during this period can have a lasting impact.

Speak with an MAI Sports & Entertainment Advisor today to develop a disciplined plan to help transform NIL earnings into long-term wealth, tax efficiency, and impactful legacy.

1https://www.irs.gov/taxtopics/tc554#

SOURCES
https://www.aol.com/articles/wealth-management-professional-athletes-services-205643063.html
https://www.commonsllc.com/insights/wealth-management-for-professional-athletes
https://www.irs.gov/taxtopics/tc554#

This is for informational purposes only. The opinions and analyses expressed herein are subject to change at any time. Any suggestions contained herein are general, and do not take into account an individual's or entity's specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Distribution hereof does not constitute legal, tax, accounting, investment, or other professional advice. Recipients should consult their professional advisors prior to acting on the information set forth herein. In accordance with certain Treasury Regulations, we inform you that any federal tax conclusions set forth in this communication, were not intended or written to be used, and cannot be used by any taxpayer, for the purposes of avoiding penalties that may be imposed by the Internal Revenue Service.

Diversification does not ensure a profit or protect against a loss in a declining market. Investing involves risk including loss of principal. No strategy assures success or protects against loss.