Attorney
Your student-athlete just landed their first NIL deal—a $5,000 signing bonus that felt like a fortune. Six months later, it’s gone: taxes took a chunk, fees took more, and the rest disappeared into purchases that seemed reasonable at the time. This story plays out constantly for young athletes who receive real income before learning how to manage it. An Oregon or Nebraska NIL attorney can help structure deals wisely, but financial literacy determines whether your student-athlete builds wealth from NIL earnings or watches the money slip away.
Understanding Your Tax Obligations
That free merchandise from a brand deal? Taxable. The cash from a signing bonus? Taxable. The “exposure” that came with free products worth $500? Also taxable. The IRS treats NIL earnings as self-employment income, which means you may owe both income tax and self-employment tax. Many student-athletes are blindsided by tax bills that consume a significant portion of what they thought they earned.
The simplest way to avoid this shock: set aside 25 to 30 percent of every NIL payment the moment it arrives. Open a separate savings account just for taxes and treat it as untouchable. When a $1,000 sponsorship payment hits your account, immediately move $250 to $300 into tax savings. This discipline prevents the painful mistake of spending money you’ll owe the IRS later.
Beginning in 2026, companies paying you more than $2,000 annually must send a Form 1099-NEC reporting your income to the IRS. For 2025 and prior years, that threshold is $600. But here’s what catches people: you must report all NIL income on your tax return, regardless of whether you receive a 1099. No form doesn’t mean no obligation.
Keep your own records of every payment—cash, products, and services. This documentation ensures accurate filing and protects you if questions arise.
Creating a Budget That Works
NIL income doesn’t arrive like a paycheck—it’s $3,000 one month, nothing the next, then $500 in product. Traditional monthly budgeting falls apart fast with this kind of variability. A percentage-based approach works better: every time money comes in, divide it the same way regardless of the amount. A reliable split: taxes (25-30%), savings (20%), needs (30-35%), and wants (15-20%).
The hard part is being honest about which category something belongs in. Needs are non-negotiables: rent, groceries, transportation, essential training gear. Wants are everything else—the new headphones, the dinner out, the impulse purchase you justified as a “reward.” There’s nothing wrong with wants, but when income fluctuates, that’s the category you cut first. Protecting needs and savings keeps your financial foundation intact during dry spells.
Most people have no idea where their money actually goes until they track it. A simple smartphone app that categorizes purchases automatically can be eye-opening—$400 on food delivery hits different when you see it as a single line item. Review your spending monthly. You’ll find cuts you can make painlessly and habits you didn’t realize you’d developed.
Building Savings and Emergency Funds
One torn ACL can change everything. So can a transfer, a coaching change, or a shift in playing time that suddenly makes you less attractive to sponsors. Athletic careers don’t follow predictable arcs, and neither does NIL income. An emergency fund covering three to six months of expenses gives you breathing room when the unexpected happens—and in sports, the unexpected always happens eventually.
If three to six months feels impossible right now, start with $50. The amount matters less than the habit. Set up automatic transfers on the day payments arrive so the money moves before you have a chance to rationalize spending it. As your NIL earnings grow, increase your savings rate proportionally. What starts as $50 becomes $200, then $500—and suddenly you have a real safety net.
Don’t let your reserves sit idle in a checking account earning nothing. High-yield savings accounts and CDs often offer significantly better rates. Your emergency fund should work for you even while it waits.
Planning for the Future
Here’s a truth most student-athletes don’t hear: for the vast majority, NIL earnings will be the last sports-related income they ever receive. Professional careers are statistically rare. What you do with NIL money now—not how much you earn—determines whether it becomes a launching pad or a memory.
Smart decisions today fund real options after graduation: seed money for a business, a down payment on a home, or a financial cushion while you build a non-athletic career. Consider contributing to a Roth IRA if you have earned income. You can invest up to $7,500 annually in 2026, and qualified withdrawals in retirement are completely tax-free. Starting at 20 instead of 30 means decades of additional compound growth—a gap that can translate to hundreds of thousands of dollars by retirement.
The biggest threat to your future isn’t low earnings; it’s lifestyle inflation. The student-athlete who earns $50,000 but spends $45,000 has less financial security than one who earns $20,000 but saves $12,000. Building wealth isn’t about making more—it’s about consistently keeping the gap between earning and spending as wide as possible.
Get Personalized Guidance From The Hughes Companies
You shouldn’t need a law degree and an accounting background to navigate your NIL earnings—but right now, that’s what it feels like. Attorney Michael R. Hughes helps student-athletes and their families cut through the complexity, structuring deals that maximize after-tax income while keeping you compliant with NCAA and state rules. Contact The Hughes Companies for a free consultation and get the personalized guidance your NIL strategy deserves.