NIL taxes for parents and guardians

When your son or daughter starts earning NIL income, you may suddenly have tax questions that never came up before. Whose income is it? Do they file their own return? Can you still claim them? Will it affect financial aid?

This guide answers those questions in general terms, using the IRS rules for tax year 2025 and the Federal Student Aid rules for the 2027-28 FAFSA. Your family’s answers depend on your facts.

Whose income is it?

The athlete’s. The IRS states that amounts a child earns by performing services are included in the child’s gross income, not the parent’s, even if under local law the parent has the right to the earnings and actually received them. NIL income is reported on the athlete’s return, not added to yours.

The same IRS passage adds an important detail: if the child does not pay the tax due on that income, the parent is liable for it. That is one reason parents have a real stake in the athlete keeping up with tax during the year.

Your athlete may need to file even if you claim them

Being claimed as a dependent does not remove the athlete’s own filing requirement. Publication 501 has separate filing rules for dependents, based on the type and amount of income. Self-employment income is a common trigger: the IRS says self-employment tax generally applies when net earnings from self-employment are $400 or more, and many third-party NIL deals are self-employment income.

If a dependent child must file but cannot because of age or another reason, the IRS says a parent, guardian, or other legally responsible person must file it for the child.

Can you still claim your athlete as a dependent?

Usually the question is whether the athlete is your qualifying child. For tax year 2025, Publication 501 lists several tests, and all of them must be met. The ones that matter most for college athletes are:

• Age. Under 19 at the end of the year, or a student under 24 at the end of the year, and younger than you.
• Student status. For this test, a student is someone who was a full-time student during some part of each of any five calendar months of the year.
• Residency. The child lived with you for more than half the year. Publication 501 treats temporary absences for special circumstances, including education, as time lived with you.
• Support. The child did not provide more than half of their own support for the year.

Other tests also apply, including the relationship test and a joint return test. If the athlete is not your qualifying child, a different set of rules for a qualifying relative may apply, and those include an income limit.

Why income alone does not answer it

The support test asks who paid for the athlete’s support, not how much the athlete earned. An athlete who earned a lot of NIL income but saved it may not have provided more than half of their own support. An athlete who spent their NIL income on their own housing, food, and other living costs may have. You cannot answer the question from income alone. It takes a look at where the money actually went during the year.

That is why we avoid rules of thumb like “if they earn more than a certain amount, you cannot claim them.” The facts that matter are spending, living arrangements, and the other tests.

How scholarships fit in

Publication 501 says a scholarship received by a child who is a student is not taken into account in determining whether the child provided more than half of their own support. An athletic scholarship therefore does not count as the athlete supporting themselves for this test.

That is a separate question from whether part of the scholarship is taxable. The IRS explains that scholarship amounts used for tuition, required fees, books, and supplies can be excluded from income for a degree candidate, while amounts used for room, board, and travel are generally taxable. If your athlete has a scholarship and NIL income, both should be considered on their return.

Tax dependency and FAFSA dependency are different systems

Whether you claim your athlete on your tax return does not decide whether they are a dependent student for financial aid. Federal Student Aid determines FAFSA dependency from its own list of questions about the student’s circumstances, such as age, marriage, graduate enrollment, military service, and certain family and housing situations. Whether a parent claims the student on a tax return is not one of those questions.

For the 2027-28 school year, the FAFSA asks about 2025 tax information, from two years before the school year starts. NIL income earned in 2025 can therefore show up on the 2027-28 FAFSA.

Possible effects on financial aid

The IRS notes that NIL income must be included on the FAFSA and could affect financial aid. How much it matters depends on the aid involved, the family’s full financial picture, and each school’s policies. We cannot predict a particular result. The school’s financial aid office is the right place to ask, ideally before large NIL income arrives.

Records and a set-aside habit

The best support a parent can give is often practical:

• Help set up one place for contracts, payment records, and tax forms. Our recordkeeping guide explains a simple system.
• Encourage setting money aside from each payment for taxes until a reserve amount is worked out. A separate savings account helps.
• Put the federal estimated tax due dates on a shared calendar.
• Keep track of where the athlete performed NIL work, because state and city tax can follow it. If your family is in Ohio, see our Ohio NIL tax guide.

Helping without taking over

NIL income is the athlete’s, and so are the decisions. Many athletes want a parent involved, and some prefer to handle things themselves. Both can work. A good pattern is for the athlete to own the decisions and the conversations, with the parent helping with organization, reminders, and questions.

When Anchor & Flint works with an athlete, the athlete is the client. Parents and guardians are included in the conversation to the extent the athlete wants, and we share the athlete’s tax information only with their authorization and any consent the law requires. That protects the athlete, and it keeps everyone clear about who is deciding what.

If the athlete is under 18

Some NIL activity begins in high school. A minor may need a parent or guardian involved in contracts, bank accounts, and tax matters, and the rules for who can sign an engagement or authorize sharing information can differ for a minor. In that case we work with the family directly, while still treating the athlete as the person whose income and future are at stake. State law and the payer’s requirements may also affect how a minor’s deal is set up, and those are legal questions for an attorney.

When to get individual CPA guidance

It makes sense to talk with a CPA when:

• Your athlete has more than one NIL payer, or income from their school
• No tax is being withheld from NIL payments
• You are unsure whether you can claim your athlete for the year
• NIL work happened in more than one state
• The athlete received products or services of real value
• You are filling out the FAFSA in a year with significant NIL income
• Your athlete is a minor

Parent and athlete checklist: before your intro call

• Talk as a family about who will join the call and what the athlete wants a parent’s role to be.
• List each NIL payer, roughly what was received, and whether it was cash, products, or services.
• Note whether any tax has been withheld or any estimated payments made.
• Note whether a parent claimed the athlete as a dependent last year, and whether that may change.
• Note the athlete’s home state, school state, and any other states where NIL work happened.
• Note whether the athlete receives a scholarship or revenue-sharing payments from the school.
• Write down your top three questions.
• Do not send tax returns, Social Security numbers, bank details, or other sensitive documents through the inquiry form or by email. If an engagement begins, we will explain how to share documents securely.

Next steps

1. Confirm that the athlete, not a parent, is reporting the NIL income on the athlete’s own return.
2. Start a records folder and a set-aside account if they do not exist yet.
3. Before filing your own return, review the dependency tests with the actual support numbers for the year.
4. Before the FAFSA, ask the school’s financial aid office how NIL income may be considered.
5. Use the checklist above to prepare for a conversation with a CPA.

If your family would like help, you can book a complimentary 20-minute intro call. Parents and guardians are welcome to join. The call is a chance to talk through your situation and whether ongoing support fits. It is not a tax review.