The Money · Updated July 6, 2026

NIL taxes for minors: the 1099, the $400 rule, and the Roth IRA play

The IRS is blunt about it: "All income from NIL activities is generally considered taxable income" — including free gear and gift cards. Being 15 doesn't change that. Here's what a parent actually needs to know, and the one move most families miss that can turn a sponsorship check into a 50-year head start.

How the tax actually works

Most NIL pay is self-employment income. The brand treats your athlete like a contractor: they'll send a 1099-NEC, and the income goes on Schedule C of the athlete's own tax return.
Two taxes, not one: regular income tax plus ~15.3% self-employment tax (Social Security + Medicare). That's why we say set aside roughly 30% of every check.
The filing trigger is tiny: your athlete must file a return once net self-employment earnings hit just $400 for the year. And income is taxable whether or not a 1099 ever shows up.
No withholding = quarterly estimates. Nobody withholds tax from a 1099 check, so once earnings are meaningful, the IRS expects estimated payments through the year.
Deductions help: legitimate business expenses (travel to a signing, editing software, a portion of gear used for content) reduce the taxable number — which is why record-keeping matters.

The "kiddie tax" question your CPA should answer: the kiddie tax hits a child's unearned income at the parents' rate — but NIL earned by doing something (posts, appearances, camps) is earned income, so it typically does NOT apply. The exception: a deal structured as a passive royalty can count as unearned and flip that. Whether your contract is "services" or "royalty" is the single most valuable question to ask a CPA.

The play most families miss: the custodial Roth IRA

Here's the quiet superpower of NIL money. A minor normally can't fund a Roth IRA because they have no earned income. NIL changes that: earned NIL income makes your kid Roth-eligible. A parent opens a custodial Roth, and the child can contribute up to the lesser of their earnings or the annual limit — $7,500 for 2026.

Why that's a big deal: money a 15-year-old puts in a Roth compounds tax-free for ~50 years. A single $5,000 NIL year moved into a Roth at 15 is worth on the order of $150,000+ at retirement at historical market averages — from one sponsorship season. The kid keeps the trophy; the money keeps working.

Before you park the money: the college-aid trap

Where the money sits	FAFSA treatment	Aid impact
Cash / UTMA in the kid's name	Student asset	Assessed up to 20% — the harshest
529 plan	Parent asset	~5.6% max — far gentler
Custodial Roth IRA	Retirement account	Not reported as an asset on the FAFSA

NIL income itself does count on the FAFSA (the IRS says so explicitly), and student income/assets weigh heavier than parents' in the aid formula — so where the money lands can quietly cost or save thousands in need-based aid. Source: studentaid.gov's SAI guide.

The 5-step money checklist

Open a separate account for NIL money — never commingle.
Set aside ~30% of every check for taxes.
Keep every contract, invoice, and receipt.
Fund the custodial Roth up to earnings (or the limit).
Get a CPA once real money moves — services-vs-royalty, multi-state deals, and aid planning are their job.

Want this as a printable? It's in the free NIL Starter Kit → · New to the rules? Florida's rules explained →

NIL for Kids is an independent educational resource — general information, not tax, legal, or investment advice. Thresholds and limits change yearly; verify at irs.gov and with a qualified CPA. Last reviewed July 6, 2026.