The Money · Updated August 1, 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.
New for 2026 — the 1099 gap just got wider. The threshold for a brand to issue a 1099-NEC rose from $600 to $2,000 for payments made on or after January 1, 2026 (IRS 2026 general instructions; it will be inflation-adjusted from 2027). The filing trigger for your athlete stayed at $400. So a teenager can be paid $1,999 by a single brand, receive no tax form whatsoever, and still legally owe self-employment tax. This is exactly where families get caught — no form does not mean no tax. Keep your own record of every payment. (Separately, the 1099-K threshold for payment apps is different again: over $20,000 and over 200 transactions.)
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 at 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
The NIL earnings themselves	Student income	Assessed at up to 50% after allowances — harsher than any asset

Read that last row twice. Most people worry about where the money is parked, but on the FAFSA the athlete's earnings bite hardest: student income is assessed at up to 50% after allowances, versus 20% for a student asset and about 5.6% for a parent asset. NIL income does count (the IRS says so explicitly), so a big sponsorship year can reduce need-based aid more than the same money sitting in a savings account would. This is a plan-ahead item, not a don't-earn-it item — talk to a CPA and the college's financial-aid office before a large deal, not after. Source: the official 2027–28 Student Aid Index & Pell Grant Eligibility Guide (June 2026).

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 August 1, 2026.