NIL money and Scholarships?

[Idaho]

1 hour ago, Paul158 said:

Wouldn't you have pay state and federal taxes on that income. Many times college students are claimed on their parents taxes so they would have zero deductions.

Yes you would pay state and federal taxes on your NIL... However, if you are paying for school yourself with NIL money, you get the tax write off at the end as well. 45k in school expenses comes in handy on your taxes at the end as well. 

 

1 hour ago, fishbane said:

1) Unless the athlete has planned in advance self employment tax (15.3%) would likely be due on NIL payments on top of normal federal and state income tax.

2) Other scholarships you speak of might be related to need.  Getting NIL money might put the student outside of need based criteria for certain scholarships, grants, and loans.  Before enrolling awards will be based on income that does not include NIL money. Some of that could go away if the students income spikes after receiving NIL $$$.  Students on an athletic scholarship would not have to deal with this risk.

Vito cited need based aid as a reason that he had not pursued NIL monies earlier.  Cornell being an Ivy does not award athletic scholarships.  They have a very large endowment (as do all Ivies) and they cover all of their students need by grants.  He was receiving significant amounts of need based aid (cost of attendance at Cornell is $88k) so if he made more money it would decrease his aid award.  Not sure what the actual numbers are but if he made $1 in NIL money he may owe $0.30 in taxes and it could have reduced his aid award from Cornell by another $0.30 or so removing some incentive to pursue it.  He said in his final season he will try and do more with NIL since his aid award is set before the start of the year and would not adjust based on his NIL income during the season.

You bring up some good points... I think it could be a matter of individual situations as you cited with Vito, which would  be different  for kids at a state school at half that price.  There are also many write-offs that come with self employment as well as paying full price for your own tuition. I know with my daughter, the educational expenses were a pretty nice write off during tax season.  Paying full price at 44k is going to get you a decent credit at the end of the day.  These guys getting large NIL would be smart to hire a good financial advisor and accountant to make sure they don't blow through all their money and get a tax bill they can't pay. 

[fishbane]

1 hour ago, Paul158 said:

Many times college students are claimed on their parents taxes so they would have zero deductions.

The student could claim the standard deduction regardless.  You might be thinking of exemptions which went away back in 2018 with Trumps changes.  If the student is paying their tuition and room and board via NIL $$ their parents likely aren't supporting them to the level required to claim the student anyway. 

A combination of factors would likely make it more advantageous for the parent to not claim their child as a dependent if the child was a full time student paying their own tuition/room/board with NIL money.

It likely wouldn't impact the parents deductions unless it was the difference between being able to claim head of household for the parent.  A college age child is unlikely to be a qualifying child unless they are younger than typical.  Similarly a college age student would likely have aged out of most child tax credits that parents typically claim. 

Educational tax credits would likely be what decides where the student is claimed as a dependent.  These can only be claimed by the person incurring the qualified education expenses.  The parents not paying educational expenses would be prevented them from claiming these.  The student would also not be able to claim them if they were a dependent on their parents taxes.  The solution would be for the student to claim themselves as a dependent provided their income does not profit them from claiming the educational tax credits.

[fishbane]

40 minutes ago, Idaho said:

 There are also many write-offs that come with self employment as well as paying full price for your own tuition. 

It's true and the student-athlete may be able to set up a business to receive NIL payments and avoid the self employment tax. Still I don't see a lot of expenses to write off in these NIL deals that are $X to attend Y school.  Its not like the student can write off tuition/room/board/books/college moving expenses as a business expense. 

If they were operating clinics in the offseason or selling merch there would be real expenses related to those activities.  Renting the venue, equipment, paying other clinicians, advertising, design for advertising/merch, cost of having said merch produced, order fulfillment costs, payment processing costs, computer and office equipment to manage all this stuff, business dinners with partners, travel expenses, ext.

If they just get paid a check for showing up at a school what expenses could be claimed?  Some legal and accounting services?  If to make it less obvious they have the athlete show up for a photo shoot for a billboard or TV commercial what expenses can be claimed even for that?  Surely it would be a nominal amount.

40 minutes ago, Idaho said:

45k in school expenses comes in handy on your taxes at the end as well. 

.. as well as paying full price for your own tuition. I know with my daughter, the educational expenses were a pretty nice write off during tax season.  Paying full price at 44k is going to get you a decent credit at the end of the day.

Educational tax credits are capped at $2500 but there is also an income phase out.  Basically if you pay at least $10k in educational expenses you've maxed out the credit.  The credit also phases out starting at AGI levels of $80k, so depending on the size and structure of the deal they may be phased out of claiming these credits.

[Idaho]

It all depends on what they are doing in terms of the NIL. I have done self employment and there are many write offs, but it depends on what they are doing. Also don’t forget that states also have write offs pertaining to education expenses and savings accounts. On my 4th year of doing this and have saved a lot of money.  I will say again that they should be hiring an accountant to guide them through this. 

[Paul158]

1 hour ago, Idaho said:

It all depends on what they are doing in terms of the NIL. I have done self employment and there are many write offs, but it depends on what they are doing. Also don’t forget that states also have write offs pertaining to education expenses and savings accounts. On my 4th year of doing this and have saved a lot of money.  I will say again that they should be hiring an accountant to guide them through this. 

Yes they definitely need the advice of an expert on taxes. I'm sure they will get an education  on income and taxing.

[RYou]

On 6/24/2023 at 12:22 PM, Paul158 said:

Yes they definitely need the advice of an expert on taxes. I'm sure they will get an education  on income and taxing.

Most big universities now have financial advisors for the student athletes.  They don't negotiate the NIL deals but can help find an NIL sponsor and then advise on taxes.

I don't see how the NCAA can cap NIL deals.  There is no way the NCAA can block an athlete from making as much as possible. Livvy Dunne, the LSU gymnast is now making over $3.5 million.  The NCAA will get slammed with a suit in a second if they try to block her NIL value; restriction of trade.  He deals were developed outside any relationship with LSU.

[Ivan Stankowski]

Is NIL money taxable income?

 

[Wrestleknownothing]

50 minutes ago, Ivan Stankowski said:

Is NIL money taxable income?

 

yes

[ionel]

6 minutes ago, Wrestleknownothing said:

yes

Are gambling winnings (eg Iowa) taxable?

[Wrestleknownothing]

1 minute ago, ionel said:

Are gambling winnings (eg Iowa) taxable?

They are, but they can be offset by loses. Sadly, no one ever loses.

[Paul158]

Just now, ionel said:

Are gambling winnings (eg Iowa) taxable?

Are you talking about Las Vegas winnings ? Then yes. If you are talking about  University of Iowa wrestling I'm not sure.

[ionel]

13 minutes ago, Paul158 said:

Are you talking about Las Vegas winnings ? Then yes. If you are talking about  University of Iowa wrestling I'm not sure.

What if you lose a bet but refuse to pay the debt, could that be considered a taxable gain?

[Paul158]

18 minutes ago, ionel said:

What if you lose a bet but refuse to pay the debt, could that be considered a taxable gain?

Yes.

[fishbane]

4 hours ago, ionel said:

What if you lose a bet but refuse to pay the debt, could that be considered a taxable gain?

Possibly.   I think the other party has to have relinquished their right to collect it or forgiven the debt for it to be a taxable gain.  Also it could be that the bet was not paid because of some dispute related to the outcome (both parties feel they won for example) or the fairness of the game as played (Ex. someone cheated).  Supposing someone marks a card in poker and this impacts the hand in a way that allows them to win.  I think you could deny payment without worry that it would be a taxable event even if the other party later "forgave" the "debt."

[ionel]

7 minutes ago, fishbane said:

Possibly.   I think the other party has to have relinquished their right to collect it or forgiven the debt for it to be a taxable gain.  Also it could be that the bet was not paid because of some dispute related to the outcome (both parties feel they won for example) or the fairness of the game as played (Ex. someone cheated).  Supposing someone marks a card in poker and this impacts the hand in a way that allows them to win.  I think you could deny payment without worry that it would be a taxable event even if the other party later "forgave" the "debt."

Or maybe he is just a weasel.  ¯\_(ツ)_/¯

Edited June 29, 2023 by ionel

[CHROMEBIRD]

Scholarships are what they are, but it will be more interesting (horrifying) to see how NIL deals shape the resources and priorities of Athletic Departments. In the recent past, departments and coaches poured a ton of money into recruiting, facilities, and resources for athletes but now NIL is (mostly) the only game in town.

Maryland's head football coach had some eye-opening takes recently. Says that time and money spent on the recruiting trail doesn't matter anymore, that the school's new training facility dedicated for football doesn't matter:

I feel like I’ve got my legs cut from underneath me. Because my strength in recruiting isn’t some slick salesman job, it’s built on the longevity of relationships. And now the way the college landscape is with the NIL, the transfer portal — everything is pretty much transactional, and relationships have kind of gone out of the window.

Locksley’s team moved into a brand-new, $149 million football-only facility, just last year. The Jones-Hill House is beautiful. Unfortunately, it doesn’t really matter. The role that it plays in recruiting is minimal in contrast to NIL. Locksley will be the first to say so and he did not hold back: "Unfortunately, we moved in at a time when facilities have been de-emphasized in a recruit’s mind. Because they’d get dressed in the trash can for $25,000."

We are already seeing this trickle down into wrestling as the effects of NIL continue unfold, but it will be wild to see those alumni emails change from "support our capital campaign for a new arena" to "give us money so we can make more NIL deals"

[fishbane]

I think this is overblown and at the same time how it should be.  Relationships and facilities do matter, but this is going to be more like the business world.  A job offer from a company where a couple of your former colleagues work with really nice facilities means something, but if another company with similar facilities and good people that is offering 20% more pay might win out. 

Part of the reason that colleges and universities have such amazing athletics facilities is because they are so good at getting people to give them money in exchange for nothing and being a nonprofit they have to find ways to spend it.  There are only so many positions in an athletic department that demand millions of dollars.  What else can they spend it on?  For years they were capped on what could go to the players.  For this reason almost all universities in major conferences have pro-level athletic facilities.  Better than some pro teams like the Oakland A's, Washington Redskins, and many MLS teams.

[Wrestleknownothing]

10 minutes ago, fishbane said:

I think this is overblown and at the same time how it should be.  Relationships and facilities do matter, but this is going to be more like the business world.  A job offer from a company where a couple of your former colleagues work with really nice facilities means something, but if another company with similar facilities and good people that is offering 20% more pay might win out. 

Part of the reason that colleges and universities have such amazing athletics facilities is because they are so good at getting people to give them money in exchange for nothing and being a nonprofit they have to find ways to spend it.  There are only so many positions in an athletic department that demand millions of dollars.  What else can they spend it on?  For years they were capped on what could go to the players.  For this reason almost all universities in major conferences have pro-level athletic facilities.  Better than some pro teams like the Oakland A's, Washington Redskins, and many MLS teams.

Amen.

The facilities arms race was a substitute form of compensation for athletes since the schools could not, would not, pay athletes directly. 

What Mike Locksley conveniently ignores is that he too would get dressed in a garabage can for an extra $25k.