For student-athletes, an athletic scholarship can be a game-changer, covering tuition, housing, and other expenses. But many athletes and parents wonder: Is my athletic scholarship taxable? The short answer is no—as long as the scholarship is used for qualifying education expenses. However, some types of income, like NIL earnings, certain travel perks, and stipends, may be taxable- which means athletes can take advantage of tax deductions and credits to reduce their tax burden. Talking about taxes typically stresses me out, so to take out some of the guess work, here are a few examples of tax deductions athletes could qualify for.
Tax Deductions Athletes Might Qualify For
Scholarships: tax-free vs. taxable. Most athletic scholarships are tax-free if they are used for:
- Tuition and fees required for enrollment
- Books, supplies, and equipment required for courses
However, scholarship funds used for non-qualified expenses may be taxable, including:
- Room and board
- Meal plans
- Stipends for personal expenses
If a scholarship includes a work requirement (outside of playing a sport), the portion related to work may also be taxed as income.
Nil earnings are taxable income. Thanks to NIL, student-athletes now earn money through sponsorships, social media, merchandise, and appearances. Unlike athletic scholarships, NIL earnings are taxable. What this means for athletes:
- Any income from NIL deals must be reported on tax returns.
- Companies paying athletes $600 or more will issue a 1099 form—athletes must report this income.
- Self-employment taxes may apply if an athlete operates as an independent contractor.
*A quick tip: since taxes aren’t withheld from NIL payments, set aside 25-30% of earnings for tax season or make quarterly estimated tax payments to avoid penalties.
Taxable travel perks for athletes. Most team-funded travel for games and competitions is tax-free, but some travel-related benefits could be taxable, including:
- Per diem payments (daily allowances) that exceed actual travel costs.
- Travel covered by sponsors (NIL-related appearances or brand-sponsored trips).
- Luxury accommodations and personal trips provided outside of official team travel.
If travel perks aren’t directly related to competition, they may be considered taxable income and should be reported accordingly.
Tax deductions and credits for student-athletes. Athletes (and parents) can take advantage of tax deductions and credits to reduce taxable income:
- Lifetime Learning Credit (LLC): Up to $2,000 for tuition and education-related expenses.
- American Opportunity Tax Credit (AOTC): Up to $2,500 for eligible students in their first four years of college.
- Student Loan Interest Deduction: If an athlete takes out student loans, they may deduct up to $2,500 in interest.
- Business Expense Deductions: Athletes with NIL earnings may deduct business-related expenses (e.g., travel for endorsements, marketing materials, agent fees).
*Another tip: if filing NIL income, keep receipts for any business-related expenses to claim deductions.
While most athletic scholarships are tax-free, student-athletes earning NIL income or receiving non-qualified travel perks must report taxable income. To stay compliant and maximize savings, athletes and parents should:
- Track all scholarship funds, NIL earnings, and travel benefits
- Set aside money for taxes, especially for NIL deals
- Take advantage of tax deductions and credits
- Consider working with a tax professional for complex filings
By staying informed and planning ahead, athletes and their families can avoid tax surprises and make the most of their financial opportunities.