The Wrong Type of NIL Planning
Let’s be honest for a second. If you are 18 years old and a million dollars hits your bank account, your first thought is probably not about estimated tax payments. It is probably not about setting up an LLC or reviewing your state residency position either. If you are being real, your list might look something like this.
New car. New watch. Flight to Miami. A weekend on a yacht. VIP tables. Designer shopping. Send some money to mom. Maybe tip the pastor.
That is not a judgment. That is just human nature. Most adults would struggle to think about the IRS when their bank account looks like that for the first time. But here is the problem. A large portion of that money may not be yours to spend.
The Check Is Not What It Looks Like
NIL income is not a salary. Nobody withheld taxes before that money arrived. In most NIL deals, the athlete receives payment as an independent contractor. The brand sends the full amount. No taxes come out first. That means the IRS is not done with that money yet.
On $1 million of self-employment income, federal tax and self-employment tax alone could reach $365,000 or more. Add state income tax if the athlete lives or trains somewhere like California. The number keeps climbing.
The check looked like $1 million. The spendable amount may be closer to half of that, depending on the situation. Spending the full amount before understanding the tax picture is one of the most common and costly NIL mistakes families face.
What the Wrong Plan Actually Looks Like
Aaron Parthemer, Co-Founder of PMG Private NIL, described this honestly in The NIL Trap. He said if he were 18 with a million dollars in his account, his plan might have included a Rolls-Royce Cullinan, a Rolex, a private jet, Bal Harbour shopping, and a rented yacht. He was not mocking athletes and was being real.
That instinct is natural. The problem is the math behind it. Buy the car. The IRS still wants their share. Rent the yacht for the weekend. The tax bill does not take weekends off. Send money to the family. That is generous. But it does not reduce what you owe. By the time tax season arrives, the money is gone. The bill is very much still there.
Why This Happens More Than People Realize
No one sits down with most young athletes and explains how self-employment income works. Schools do not teach it. The brand cutting the check is not responsible for explaining it either. The money arrives. It looks available. Life moves fast at that age. Decisions get made before the planning does.
This is not a character issue. It is a knowledge gap. And it is one that can follow an athlete for years if it is not addressed early.
Some athletes end up with tax bills they were not expecting. Others face penalties for missed estimated payments. Some deal with state tax issues from income earned across multiple states. None of that has to happen. But it requires planning before the money hits, not after.
What Smart Planning Actually Looks Like
Smart NIL planning is not complicated. It just has to happen at the right time. Here are the basics that can make a real difference.
- Open a separate bank account for NIL income. Keep business money away from personal spending. This one step adds clarity and discipline immediately.
- Set aside a tax reserve from every payment. A starting point of 35 to 50 percent may be appropriate for many athletes. A qualified professional should calculate the actual number. But saving nothing is never the right answer.
- Make quarterly estimated tax payments if required. When income is not subject to withholding, estimated payments may be due four times a year. Missing them can add penalties on top of the tax owed.
- Track legitimate business expenses. Equipment, professional services, travel related to NIL activity. Documented deductions may reduce the total tax owed. Keep records from the beginning.
- Review entity structure before deals are signed. An LLC or other structure may make sense depending on the athlete’s situation. This is a conversation for a qualified professional, not something to figure out after the fact.
- Have someone review the contract first. Tax planning matters. So does understanding what you are agreeing to before you sign.
None of this is meant to take the joy out of earning. It is meant to protect it.
The Rolls Is Fine. Eventually.
There is nothing wrong with enjoying success. NIL income is a real blessing for athletes who work hard to build their brand and their platform. The goal is not to tell anyone they cannot enjoy what they earn. The goal is to make sure they are spending money that is actually theirs.
Buy the car after the tax reserve is set aside. Book the trip after the estimated payments are handled. Celebrate after the plan is in place. That sequence changes everything. The fun is still there. The financial damage is not.
What Parents Can Do
Parents are often the first line of awareness when money arrives. That is both an opportunity and a responsibility. Before any NIL payment is received, a few questions are worth asking.
How will this payment be reported? Will any taxes be withheld? Has a professional reviewed the contract? Is there a plan for tax reserves?
These are not overprotective questions. They are the right ones. Asking them early may protect the athlete from problems that take years to untangle.
NIL also affects family finances in ways that are easy to miss. It may impact whether the athlete can be claimed as a dependent. It may affect financial aid. Moreover, it may create new filing requirements for the whole family. Getting educated before the first deal is a much better position than reacting after the fact.
The Landscape Keeps Changing
NIL rules are still evolving. The House v. NCAA settlement added school-based revenue sharing on top of third-party deals. That means some athletes now have multiple income sources with different reporting requirements.
What was true about NIL tax planning in 2021 has been updated and complicated by 2026. What is true today may shift again. The only consistent answer is having a team that stays current and applies that knowledge to the athlete’s specific situation.
The Real Takeaway
The wrong type of NIL planning looks like spending first and asking questions later. It looks like assuming the check is fully available when it arrives. It looks like waiting until tax season to figure out what was owed.
The right type looks like building the structure before the money hits. It looks like treating NIL like a business from day one. It looks like having the right team in place so the opportunity stays a blessing. The Rolls-Royce can wait a few days. The tax plan cannot.
Stay Ahead of the Game
The best financial decisions are usually made before the first check arrives, not after the tax bill shows up. As NIL opportunities continue to evolve, staying informed is one of the best ways to protect your athlete’s future.
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PMG Private NIL
Location: 1800 E Las Olas Blvd fl 2, Fort Lauderdale, FL 33301
Email: info@pmgnil.com
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The opportunity is real. Protect it.
Disclaimer: This content is educational and is not legal or tax advice. Every athlete’s situation is different. Consult a qualified tax or legal professional before making financial or tax decisions.
