Blog · 16 October 2026

NIL Income for Student Athletes: Schedule C vs Schedule E, W-2/1099-NEC, Royalties and What US CPA Firms Should Tell Clients

By Keshav Bansal, CA

NIL income — payments tied to a student athlete’s name, image and likeness — is ordinary taxable income whether it arrives as cash, property or services. The IRS refreshed its guidance at IRS.gov/NIL (page last reviewed August 14, 2026), and IRS e-News for Tax Professionals 2026-40 (October 8, 2026) flagged the same page for practitioners. For US CPA firms, the filing fork is not “is it taxable?” but Schedule C versus Schedule E: personal services trigger self-employment tax; a pure image royalty generally does not.

What counts as NIL income

Per the IRS, if a student athlete receives any monetary or financial gain, in cash, property or services, from a transaction that uses their name, image or likeness, that gain is NIL income. The agency’s list of sources is broad: university revenue-sharing payments after the House Settlement, damages from that settlement, influencer and brand deals, sponsorships, autograph fees, promotional and guest appearances, gifts, gift cards, in-kind services and royalties. Non-cash bartering counts at fair market value — merchandise, gift cards, haircuts, and legal or accounting help are all examples the IRS names.

Clients must report NIL income even when the payer never issues a Form 1099 or Form W-2. Before money moves, athletes should give the payer a completed Form W-9 or Form W-4, as the IRS instructs.

Employee (W-2) versus independent contractor (1099-NEC)

Worker status turns on facts and circumstances, especially the degree of control the school or company has over the athlete’s services — the same framing the IRS uses on its independent-contractor page. If the athlete is an employee, federal income tax and FICA/Medicare are generally withheld and the payer issues Form W-2; wages go on Form 1040 in the usual way.

If the athlete is an independent contractor, the IRS says they should receive Form 1099-NEC when the payer’s payments for services (cash, merchandise or services in kind) total $2,000 or more for the year. That $2,000 threshold applies to payments received in 2026 and will be indexed afterward — the same shift covered in our Form 1099-NEC $2,000 threshold guide. Service income belongs on Schedule C with Schedule SE for self-employment tax. Missing forms do not erase the income; they just make year-end reconstruction harder.

Royalty-only deals: Schedule E, no SE tax

When the athlete is paid solely for use of name, image and likeness and does not provide active personal services, the IRS says the payer should issue Form 1099-MISC for royalty income. Royalties go on Schedule E and are not reported on Schedule SE. The IRS’s own split example is the one firms should train on: a company that uses an athlete’s picture may pay both a photo-shoot fee and a royalty for ongoing use of the image. The photo-shoot fee is self-employment income on Schedule C because the athlete personally performed services; the royalty for use of the image is not self-employment income and belongs on Schedule E.

That split is where returns go wrong. Treating an entire mixed deal as Schedule E understates SE tax; dumping a pure image license onto Schedule C overstates it. Contract language, deliverables calendars and who controlled the shoot all matter. For related self-employment classification friction in partnership settings, see our limited partner self-employment tax note after Soroban. Where NIL activity looks more like a hobby than a trade or business, coordinate with §183 hobby-versus-business rules before claiming losses.

Estimates, states, FAFSA and House Settlement context

Independent contractors typically have no withholding on NIL pay. The IRS points athletes to Form 1040-ES for estimated income and self-employment taxes so they avoid a spring balance-due and underpayment penalties. Track where services are performed: the IRS warns that athletes may owe state tax to a state where they earn NIL income, not only their home state.

Receiving NIL income can also affect need-based aid. The IRS says income or benefits received as a student-athlete must be included in taxable income on the FAFSA and can change the aid package; Pell Grants can be affected as well. Send clients to the financial-aid office before they sign a large deal.

For context only, the IRS page summarizes the June 6, 2025 House Settlement (N.D. Cal.), which allows Division I programs to share revenue directly with athletes while private and collective NIL deals continue for a legitimate business purpose, with NIL Go as the settlement’s third-party deal reporting platform. Settlement mechanics are not a substitute for the Form 1040 classification rules above.

Preparer checklist

• Inventory every deal. Cash, merch, gift cards, services in kind, revenue-share and settlement amounts; fair market value non-cash items.
• Classify worker status. Control facts → W-2 wages versus 1099-NEC / Schedule C.
• Split mixed contracts. Photo-shoot or appearance fees on Schedule C + SE; pure image royalties on Schedule E (1099-MISC).
• Do not wait for forms. Report income even with no 1099 or W-2; reconcile any forms that arrive later.
• Set estimates. 1040-ES for contractors with little or no withholding.
• Map state days and venues. Appearances and shoots can create nonresident filings.
• Flag FAFSA. Remind athletes that taxable NIL income feeds the aid application.
• Keep expense files. Receipts, travel and mileage logs for ordinary and necessary costs tied to the activity; entity choice only after advising on filing and SE tax.
• Watch QBI. Schedule C NIL profits may interact with §199A — see our QBI deduction §199A 2026 guide.

Where Tax Brew fits

NIL packages create messy books — multiple payers, barter values and Schedule C/E splits — before advice ever starts. Tax Brew provides bookkeeping, cleanup and tax prep support for US CPA firms, with the first 20 hours free for qualifying engagements, while your team keeps the review, advice and sign-off. See our services, or email info@taxbrewglobal.com.

Sources: IRS — Name, image and likeness income (IRS.gov/NIL; reviewed Aug. 14, 2026); IRS e-News for Tax Professionals 2026-40 (Oct. 8, 2026); IRS — Independent contractor (self-employed) or employee?; IRS — Estimated taxes. General information, not tax or legal advice.