How Much Tax Do College Athletes Pay on NIL Income? Real Numbers for a $120,000 NIL Year

Most college athletes earning serious NIL income will owe more in taxes than they expect. Not because the rules are unfair, but because nobody structured their income before the money started moving.

Here is the short answer: an athlete earning $120,000 in NIL profit with no structure and no planning will typically send around $28,800 to the IRS and put $0 toward their own future.

The same athlete, structured properly, sends roughly $15,100 to the IRS and puts about $37,000 into a retirement account they own. Same income. Same deals. Different structure.

This guide walks through exactly how that works, with real numbers.

The numbers below are illustrations. If you want to know what your version looks like, schedule an NIL Strategy Call with Aureus Advisory Partners at aureusadv.com/nil. We will run your actual numbers before you sign another deal.

Why Do College Athletes Pay So Much Tax on NIL Income? 

NIL income is self employment income. You are not an employee of the collective, the brand, or the platform. You are an independent contractor running a business, whether you think of it that way or not.

That means no taxes are withheld from your payments, and it means you owe self employment tax of 15.3 percent on top of regular federal income tax. At a normal job, your employer pays half of Social Security and Medicare. With NIL income, you pay both halves yourself, and that 15.3 percent applies before your income tax is even calculated.

This is the single biggest surprise for NIL athletes and their families, and it is the tax that proper structuring is designed to control.

Should NIL Athletes Set Up an LLC or an S-Corp, or Stay an Individual?

Every NIL athlete is operating under one of three structures, whether they chose it or not.

1. Individual (sole proprietor)

This is the default. If you signed deals in your own name and did nothing else, this is you. Every dollar of profit is hit with the full 15.3 percent self employment tax plus income tax.

2. Single-member LLC

This is what most athletes are told to get. Here is what most people will not tell you: a single-member LLC, by itself, changes nothing about your taxes. The IRS treats it exactly like a sole proprietorship. An LLC provides liability separation and a professional structure for contracts and banking, and it is the necessary first step, but if someone told you an LLC alone would lower your tax bill, they were wrong. Your tax bill is identical to Scenario 1.

3. LLC taxed as an S-Corporation

This is where the actual tax planning happens. With an S-Corp election, you become an employee of your own company. You pay yourself a reasonable salary through payroll, and the remaining profit flows to you as a distribution that is not subject to self employment tax. The S-Corp also unlocks the most powerful move available to a young athlete: a Solo 401(k) funded through your own payroll.

What Business Expenses Can NIL Athletes Deduct?

Every scenario below starts after legitimate business deductions. NIL athletes routinely have deductible business expenses they never capture: agent and marketing fees, content production costs, travel for appearances, training expenses tied directly to paid deals.

These vary widely from athlete to athlete, which is exactly why cookie-cutter advice fails.

An athlete grossing $135,000 with $15,000 in properly documented deductions is taxed on $120,000, not $135,000.

Capturing those deductions correctly, and being able to substantiate every one of them, is the floor of good tax work. The scenarios below start from $120,000 in net NIL profit.

How Much Tax Will an Athlete Pay on $120,000 of NIL Income?

Most tax articles show you the tax bill. The better question is the one families actually ask: after taxes, after everything, what does my athlete keep?

Here is $120,000 in net NIL profit under two structures. Figures are illustrative, based on a single filer taking the standard deduction. Your numbers will differ.

	No structure (individual or LLC only)	S-Corp with payroll and Solo 401(k)
Net NIL profit	$120,000	$120,000
Salary through payroll	n/a	$55,000
Self employment / payroll tax	~$17,000	~$8,400
Federal income tax	~$11,800	~$6,700
Total federal tax	~$28,800	~$15,100
Solo 401(k) funded	$0	~$37,000
Spendable cash after tax and retirement	~$91,200	~$67,700
Total wealth kept (cash + retirement)	~$91,200	~$104,900

Read that bottom line as a story about where the money went.

The unstructured athlete sent roughly $28,800 to the IRS and put $0 toward his own future. The structured athlete sent roughly $15,100 to the IRS and put $37,000 into an account he owns.

Same income. Same deals.

The only difference is that one athlete had a structure working for him and the other was the structure's customer.

Over a four-year college career at this income level, that difference is not a rounding error. It is well over $50,000 in taxes redirected and potentially $150,000 in retirement funding that either happened or never did.

The $120,000 question

Without structure: ~$28,800 to the IRS. $0 saved for your future.

With structure: ~$15,100 to the IRS. ~$37,000 in a retirement account you own.

Same athlete. Same deals. Different advisor.

The spendable cash line matters too, and we show it on purpose. The structured athlete has less cash in hand this year because $37,000 went into an account he owns instead of a lifestyle he will not remember. For a 20-year-old with a compressed earning window, that tradeoff is the entire game.

Two honest notes on this comparison, because we would rather you trust the math than be impressed by it. First, a sole proprietor can technically open a Solo 401(k) too. Almost none do, because nobody sets it up for them. Second, the salary figure is not a number you get to pick to minimize taxes.

The IRS requires reasonable compensation for the work you perform, and that figure must be documented and defensible. Setting it correctly is the difference between a tax strategy and an audit problem.

Every month this structure is not in place, the meter runs in the wrong direction. Payroll cannot be backdated and retirement contributions cannot be made retroactively. If your athlete is earning six figures in NIL income, schedule an NIL Strategy Call at aureusadv.com/nil and find out what your $120,000 table looks like.

Can College Athletes Have a 401(k)? 

Yes, and this is the piece almost no NIL athlete is told about. It is where the S-Corp structure becomes a wealth engine rather than just a tax maneuver.

With payroll running through your S-Corp, you can fund a Solo 401(k) two ways at once. You contribute as the employee, deferring up to $23,500 of your salary before income tax. Then your company contributes as the employer, up to 25 percent of your W-2 wages, and that employer contribution is a business deduction. Your own company is paying you a second time, into an account you own, and writing it off. 

In the scenario above, that is roughly $37,000 per year into retirement for an athlete who may be 19 or 20 years old. Money invested at that age has 40 plus years to compound before traditional retirement. No signing bonus, no future contract, no NIL deal will ever match the mathematical advantage of dollars invested that early. And if the athletic income window closes early, which for most athletes it does, that account does not close with it.

This is what we mean when we say the entity is not the strategy. The entity is the container. Payroll, retirement funding, quarterly estimates, and defensible documentation are the strategy.

At What Income Level Is an S-Corp Worth It for NIL Athletes?

Around $75,000. This is the level where the S-Corp conversation starts. The savings are real but tighter, and the election is sometimes not worth it yet. Anyone who tells every $50K athlete to elect S-Corp status is selling a product, not giving advice. The right answer at this level depends on your trajectory, your deal pipeline, and your state footprint.

$100,000 to $200,000. The scenario above. At this level, the structure typically pays for itself several times over, and skipping it is an expensive decision.

$250,000 and above. The S-Corp math gets stronger, but structure becomes the smallest part of the picture. At this level the real work is multi-state planning, income timing, retirement contributions that can exceed $70,000 per year between employee and employer contributions, and preparing for a potential professional contract. This is financial front office territory.

Do Texas Athletes Pay State Taxes on NIL Income?

If you live and play in Texas, you have a real edge: Texas has no state income tax. A Texas athlete keeps state tax at zero on income earned at home, which is a meaningful advantage over athletes in states like California.

But here is what catches Texas athletes off guard. When you earn NIL income connected to activity in another state, an appearance in Los Angeles, a camp in Atlanta, a deal tied to a game played in Baton Rouge, those states can claim the right to tax that income. Professional athletes have dealt with this for decades.

It is often called the jock tax, and it now applies to college athletes with multi-state NIL activity. A Texas athlete with a national brand deal and travel income can easily end up with filing obligations in three or four states, and the penalties for ignoring them compound quietly.

Do NIL Athletes Have to Pay Quarterly Estimated Taxes?

Because nothing is withheld from NIL income, the IRS expects you to pay as you earn through quarterly estimated payments, generally due in April, June, September, and January. Miss them and you owe underpayment penalties on top of the tax itself, even if you pay in full at filing time.

For an athlete earning $120,000, those quarterly payments are five-figure checks. Calculating them correctly matters, especially when NIL income is lumpy, with a big collective payment one month and nothing the next. A flat percentage rule of thumb either has you overpaying and starving your cash flow, or underpaying and collecting penalties.

Who Manages All of This Once the S-Corp Is Set Up?

The S-Corp structure is not a set-it-and-forget-it move. It requires real, ongoing work: monthly bookkeeping, payroll processing with proper filings, quarterly estimated tax calculations that track your actual income instead of a guess, a separate business tax return, and your personal return built to match. Done wrong or done late, the structure stops being a tax strategy and starts being an audit exposure.

At Aureus, all of it runs under one flat monthly engagement. Bookkeeping, payroll, quarterly estimates, the business return, the personal return, and direct access to an IRS-credentialed Enrolled Agent. Families should not be assembling a bookkeeper, a payroll service, and a tax preparer who have never spoken to each other. One firm, one number, one accountable advisor.

Why Should NIL Athletes Work With an Enrolled Agent? 

Aureus Advisory Partners is led by an IRS-credentialed Enrolled Agent. That credential matters for two reasons.

First, everything we build is built to be defended. Reasonable compensation studies, documented payroll, clean books, substantiated deductions. Tax savings that cannot survive an IRS examination are not savings. They are a deferred bill with penalties attached.

Second, if the IRS ever does come asking, an Enrolled Agent is federally licensed to represent you directly before the IRS in all fifty states. Most advisors who set up entities cannot do that. We are not just the firm that builds the structure. We are the firm that stands behind it.

How Do I Find Out What My NIL Tax Numbers Look Like?

The scenarios above are illustrations. Your version depends on your income mix, your deal pipeline, your state footprint, and your family's situation, and that is exactly the analysis we run in an NIL Strategy Call.

You have now seen what $120,000 looks like structured and unstructured. The only table that matters is yours. Schedule your NIL Strategy Call at aureusadv.com/nil. Thirty minutes, your real numbers, and a clear answer on whether the S-Corp structure pays for itself in your situation. If it does not, we will tell you that too.

Frequently Asked Questions

1. Do college athletes have to pay taxes on NIL income?

Yes. NIL income is taxable self employment income, even for a full-time student, even if the athlete is on scholarship, and even if the money came from a collective rather than a brand. No taxes are withheld from NIL payments, so the athlete is responsible for federal income tax, self employment tax of 15.3 percent, and any applicable state taxes. Scholarships covering tuition generally remain separate, but NIL earnings are taxed like business income because that is what they are.

2. Does an LLC reduce taxes on NIL income?

By itself, no. A single-member LLC is taxed exactly like a sole proprietorship, so the tax bill is identical. The LLC is still the right first step because it separates business from personal, professionalizes contracts and banking, and creates the container for real tax planning. The tax savings come from what is built inside it: the S-Corp election, payroll, and retirement funding.

3. At what income level should an NIL athlete consider an S-Corp?

The conversation typically starts around $75,000 in annual NIL profit. Below that, the costs and obligations of the structure often outweigh the savings. Above $100,000, the structure usually pays for itself several times over. The honest answer depends on your trajectory, your deal pipeline, and your state footprint, which is why we run the analysis on your actual numbers before recommending an election.

4. Can a college athlete really have a 401(k)?

Yes, and it is one of the most underused advantages in NIL. An athlete whose S-Corp runs payroll can fund a Solo 401(k) as both employee and employer, in the range of $37,000 per year in the scenario above. The employer portion is a deduction for the athlete's own company. Dollars invested at 19 or 20 have decades to compound, which is a mathematical advantage no future contract can replicate.

5. Do Texas athletes pay state taxes on NIL income?

Not on income earned in Texas, since Texas has no state income tax. But income connected to activity in other states, such as paid appearances, camps, or deals tied to games played out of state, can be taxable in those states. This is the jock tax, and it applies to college athletes now. A Texas athlete with national deals can have filing obligations in several states without realizing it.