STUDENT ATHLETESCOLLEGE

Alston Awards vs. NIL and Their Tax Implications

In July 2021, a new policy was introduced allowing student-athletes to earn money from their Name, Image, and Likeness (NIL). These NIL deals are the primary way student-athletes earn money, but there is another opportunity for income for education expenses deriving from a lawsuit resulting in Alston Awards. Alston Awards provide student-athletes with up to $5,980 annually.

Alston awards grant students with funds to use for school expenses, but where did the awards come from?

Alston Awards

Shawne Alston was a former West Virginia running back whose case is the namesake of the Alston Awards. Beginning in 2014, Alston’s lawyers championed his lawsuit against the NCAA demanding schools be allowed to distribute funds to student-athletes to assist with their education-related expenses. A total of 27 other athletes filed alongside Alston in an attempt to change rules that they deemed unfair. After five years of fighting in court, the Alston money was awarded and adopted into legislation. The NCAA filed petitions to the Supreme Court of the United States in rebuttal but were ultimately defeated by a unanimous 9-0 vote in 2021. As it stands, up to $5,980 of awarded funds per year can be used by student athletes to help pay for graduate and undergraduate degrees, study abroad programs, internships, computers, tutoring services, and more.

What it means for athletes

The income earned from Alston Award money can be a great way to take care of educational costs in addition to personal expenses. This money helps student-athletes who may be working part-time jobs to pay for school or who have taken out loans. Eligibility for Alston Award money is determined by the university utilizing academic and athletic standards. Alston money that is used towards qualified educational expenses is tax exempt.

Examples of qualified educational expenses include:

• Computers

• Textbooks

• Supplies

• Fees

• Tuition

Examples of non-educational expenses include:

• Room and board

• Travel

• Research

• Equipment or other expenses not related to attend

NIL Deals

NIL deals are a great way for student-athletes to earn income and are offered by external partners as a way for student athletes to earn money using their Name, Image, or Likeness. NIL deals can vary greatly allowing for some athletes to receive free materials to promote while others make over six figures. Unlike the Alston Award money, NIL money can be used for any expenses, including personal.

However, students who earn an income from NIL could have impacts on their financial aid and money from NIL is considered taxable income.

Students are then left to figure out what they are required to claim in taxes on their own. A wise move for student-athletes would be to attempt to calculate the taxes they will owe on their NIL deals before April’s tax filing deadline comes around. The general rule is the more money a person earns, the higher tax bracket they fall into resulting in larger tax payments.

Student-athletes operate as independent contractors when receiving money from either NIL deals or Alston Awards. There are two tax forms used when filing these taxes: the 1099-NEC and 1099-K. If payment to the athlete exceeds $600 in value, a 1099-NEC must be completed. If the money is sent through a third-party app such as PayPal, a 1099-K form is required instead. There may be multiple forms depending on the number of brand deals a student-athlete has.

Keep in mind student-athletes earning more than $400 are required to pay self-employment taxes, which are 15.3% of their net income. It’s important that student-athletes keep every document and receipt for expenses related to work with their brands or companies. Organization will be key to prevent any headaches when it comes time to file taxes.

Sources:

https://www.ajc.com/sports/georgia-bulldogs/nil-timeline-how-we-got-here-and-whats-next/EOL7R3CSSNHK5DKMAF6STQ6KZ4/

http://blog.turbotax.intuit.com/work/student-athlete/what-are-alston-awards-and-the-tax-implications-84053/

https://www.forbes.com/sites/taxnotes/2021/07/20/taxing-college-athletes-after-ncaa-v-alston/?sh=13f7faff328c

https://www.si.com/college/2023/04/04/ncaa-multimillion-dollar-lawsuit-alston-supreme-court-case-hubbard

https://www.jmco.com/articles/collegiate-athletics/alston-decision-what-does-it-mean-for-student-athletes-universities/