Giving money to an NIL collective? Heads up: It may not be a tax write off

The world of college sports changed dramatically in 2021 when new NCAA rules around Name, Image, and Likeness (NIL) deals came into play. Since the change, college athletes can make money a variety of ways, such as endorsement deals and sponsorships.

The new rule has also given rise to NIL collectives, a way for fans to financially support their favorite college athletes like never before. These organizations have sprung up across the country allowing boosters to pool their money, which is then distributed to one or more players.

As individuals and business pay into the collective, they may think they’re getting a tax write off. However, the IRS clarified recently that some NIL collectives will not be considered a nonprofit having 501(c)(3) status.

NIL collective payments may not be charitable contributions

So, where is the confusion coming from? It all has to do with whether the collective is tax exempt or not. If the NIL collective does not have 501(c)(3) status, then any contributions you make will not be tax deductible on the federal level.  

If the NIL collective does not have 501(c)(3) status, then any money you’ve given to the collective is just a payment – not a charitable contribution or tax-deductible donation. On the state level, there are some states that will allow NIL collective payments to be treated as tax exempt.

What should you do if you’ve paid into an NIL collective?

Paying money into a collective can be a great way to support the college athletes you love. But, if you’re expecting to get a break on your taxes next year, you’ll want to ensure the following:

• The NIL collective has 501(c)(3) status
• You have a receipt showing the amount and purpose of the donation

For state taxes, you can check with your local tax pro, who can provide details on the tax details for your state.

Need help with NIL taxes? Turn to H&R Block

Whether you’re an athlete receiving NIL income or a fan wondering if NIL collective payments are tax deductible for your situation, an H&R Block tax pro can help.

We’ve helped college athletes from schools large and small with NIL related taxes as part of H&R Block’s A Fair Shot program that’s championing gender equity and helping close the NIL deal gap between female collegiate athletes and their male peers.