In this interview, CPA and TurboTax expert Lisa Greene-Lewis offers some valuable tax advice for both parents and NIL athletes, who are now considered self-employed for tax purposes.
NIL athletes can get tax breaks
College athletes can now make money using their name, image, and likeness (NIL), but many don't realize they can also get tax breaks for doing so.
In a recent interview, Lisa Greene-Lewis, TurboTax expert and CPA, says NIL athletes are considered self-employed and will likely have to file their own tax returns. But the good news is that NIL athletes can deduct any expenses directly related to their NIL activities. This includes things like travel to events, mileage, website support, and video equipment.
"A lot of them are influencers now, so video equipment and things like that are directly related, they can deduct that and really lower their taxes," Greene-Lewis said.
NIL athletes should also be aware that they may have to pay quarterly estimated taxes if they expect to owe $1,000 or more.
TurboTax can help NIL athletes file their taxes and identify all of the deductions they're eligible for. The company also offers TurboTax Taxcaster, which helps people estimate their taxes and figure out where they stand for the year.
Here are some tips for NIL athletes filing their taxes:
- Keep track of all of your income and expenses.
- File a Schedule C as a self-employed person.
- Deduct any expenses directly related to your NIL activities.
- Pay estimated taxes if you expect to owe $1,000 or more. This helps avoid penalties.
- Use TurboTax to help you file your taxes and identify all of the deductions you're eligible for.
- If you're an NIL athlete, be sure to take advantage of these tax breaks. You deserve to get the credit for all of your hard work.
Other items to consider include:
State taxes: Athletes may need to file state income taxes in multiple states if they earn NIL income in states other than their resident state. The rules vary by state so it's important to understand the requirements.
Planning ahead: Athletes should think about taxes when negotiating NIL deals and budget accordingly. Unexpected tax bills can be avoided with planning.
IRS attention: With the growth of NIL deals, the IRS will likely increase enforcement to ensure compliance. Athletes should take care to report income accurately.
Non-cash income: Athletes must report the fair market value of any non-cash income like free products, gifts, etc. Keep detailed records.
Collectives: There are open tax questions around donations to NIL collectives. Athletes should consult experts on these new issues.
(For more, read Name, Image and Likeness at the IRS's Taxpayer Advocate Service)
Read the full Q&A below or watch the video above.
Video transcript:
Tracy Byrnes: A lot of talk these days about college kids making money as athletes. And can they benefit from that? NIL athletes actually do get some tax breaks. Lisa Greene-Lewis, TurboTax expert and CPA, is here with us right now. I guess -- so the first question is, what the heck is an NIL athlete?
Lisa Greene-Lewis: So the NCAA passed that athletes can now use their name, image, and likeness and make money. So that's what that is. And one thing that they need to know is: now that they're making money, they are considered self-employed because they're probably paid on a 1099 of some sort, like, a 1099-NEC or 1099-K.
Tracy Byrnes: So in the previous video, we talked about potentially having the kids file separately versus their parents as opposed to being on their parent's tax return. This is probably a surefire reason the kid has to file separately in order to get the benefits, because what you're saying basically is they need to file a Schedule C then, as a self-employed person.
Lisa Greene-Lewis: Right. Exactly. And a lot of these kids are making a lot of money. So they would have to file their own tax return.
Tracy Byrnes: So what are the benefits? What are the things they could take advantage of then as an NIL athlete?
Lisa Greene-Lewis: Yeah, a lot of them are just -- they're new to this. This is probably -- well, tax year 2022 was probably the first full year where this was in place and they were filing taxes. And a lot of them just don't realize that the things that they're doing to make money using their name, image, and likeness can -- anything directly related can be deductible, just like a self-employed person that has a business.
So their travel to an event where they're getting paid for it, anything related to their travel, their mileage, the percentage of their car usage, if they have a website that they're using to market themself or website support. A lot of them are influencers now, so video equipment and things like that are directly related, they can deduct that and really lower their taxes.
Tracy Byrnes: That's a great point. They have to change the mindset a little. They are now self-employed, so whatever income they make can be offset by whatever expenses they incur. So that's, I think, probably news to a bunch of these athletes.
Lisa Greene-Lewis: Yes, it is. It's a first for a lot of things for them, the first time they're making a lot of money, first time they're having to file taxes. Another thing they should think about is being self-employed, they have to think about if they have to pay estimated taxes because if you expect to owe $1,000 or more, then you need to pay estimated taxes.
Tracy Byrnes: Yeah, so this is probably a good time for them to start tooling around on TurboTax to figure this out. I'm guessing TurboTax can help walk them through this.
Lisa Greene-Lewis: Yes. We have TurboTax TaxCaster which helps you estimate and figure out where you stand in the year. And then at tax time, we have our TurboTax self-employed that really helps you identify those deductions and expenses that are directly related to your business. And then if you want, you can fully hand your taxes over to our TurboTax live experts, and you don't have to worry about it.
Tracy Byrnes: Yeah, it definitely starts to get confusing when you're self-employed. So if you know an NIL athlete, if you are an NIL athlete, pay attention to this stuff because you deserve to get the credit for all your hard work. Lisa Greene-Lewis, TurboTax expert and CPA, thank you for all of that.
Lisa Greene-Lewis: Thank you for having me.
Editor's Note: The content was reviewed for tax accuracy by a TurboTax CPA expert for the 2022 tax year.
