Miami quarterback Darian Mensah
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Last year, Texas Quarterback Arch Manning topped On3’s estimated NIL valuation list at $6.8 million, yielding $2.47 million alone in federal income tax liability. This year, college football has a new NIL king in Miami Hurricanes signal caller, Darian Mensah, a transfer from Duke University. While NIL earnings continue to surge, student-athletes are taking home far less than this amount due to income tax liabilities. In fact, a student athlete like Oregon’s Dante Moore makes the same as Washington’s Demond Williams Jr. on an after-tax basis even though his NIL valuation is much higher. The reason: a large difference in state income taxes owed.
How NIL Income Gets Taxed
Following the Supreme Court’s unanimous ruling in NCAA v. Alston and the earlier O’Bannon v. NCAA litigation, the NCAA began allowing athletes to profit from their name, image and likeness. While athletes rejoiced at their newfound freedom to earn money while maintaining their amateur status, they also are now meeting a new challenge – income taxes. Under Internal Revenue Code Section 61, NIL payments — cash, merchandise, free use of a car, whatever form they take — are gross income, and are subject to tax at the federal, state, and local level.
Complicating their tax payments is the notion that the NIL income is not treated as wages. For tax purposes. student athletes are treated as independent contractors. This means their income is self-employment earnings, triggering a second layer of tax tend to overlook (15.3% self-employment tax for Social Security and Medicare).
Student athletes must make estimated tax payments on a quarterly basis and the money earned on a calendar basis (rather than the school year basis) is what drives these payments. This means that the student athletes must clearly document all NIL received as well as all business expenses, which may serve as deductions for their self-employment.
The State Tax Wedge Accounts For Significant Variation In NIL Taxes
A staggering high number of student athletes (9) in the top 25 of compensation play for a school that does not levy income taxes. Six alone play in Texas (Manning, Coleman, Jennings at SMU, Reed at Texas A&M, Weigman at Houston, and Simmons), plus two at Miami and one at Washington. Their effective tax rates cluster tightly in the 36.4%–37.5% range. This tax is comprised of federal tax and self-employment tax with nothing else added.
These effective tax rates seem small compared to the two California-based student athletes Cal’s Jaron-Keawe Sagapolutele and USC’s Jayden Maiava. California has a top effective tax rate of 13.3%, which leads these student athletes to have an effective tax rate around 49% — almost half of their estimated income goes to pay taxes. Oregon’s 9.9% top bracket does something similar to University of Oregon star quarterback Dante Moore, whose 46.8% effective rate is the third-highest.
For Moore, the impacts are staggering. He has the same NIL valuation ($5 million) as Ohio State wide receiver Jeremiah Smith. However, due to Oregon’s high state income tax rates, Moore has over $200 thousand less in after-tax earnings. In fact, Moore’s NIL valuation is $750 thousand more than Washington quarterback Demond Williams Jr. However, their after-tax incomes are nearly identical.
NIL Is Paid On A School Year, Taxable Income Is Determined Annually
Many student-athletes listed in the top 25 highest paid football athletes for the 2026 season also were ranked highly for the 2025 season. Important to the student athletes is that they need to breakout their income based on the calendar-year, rather than the school year.
A player’s 2026 Form 1040 covers everything actually collected between January 1 and December 31, 2026, rather than what is tied to this year’s on-field production. Thus, if a player earned some of their 2025 NIL in January of 2026 for bowl games or the playoffs, or later in the year, then that money will be added to their 2026 tax liability.
In practice, that means the figures above are a reasonable proxy but not a precise one. A player who signed a big deal during the spring transfer portal window, shot a national commercial in the offseason, or is still collecting installment payments from a 2025-season deal that runs into early 2026 will owe tax on all of that in addition to whatever this season’s valuation represents pushing their actual 2026 liability above what is shown above.
Conversely, a player paid mostly in early 2027 for work performed this season could see part of the 2026 season’s money land on next year’s return as the IRS cares about the date the money is received. For anyone using this table to actually plan a quarterly estimated payment, the calendar-year date matters more than the season.
States Are Racing To Cut Student Athletes Out Of Their Own NIL Tax Base
The tax wedge described above has not gone unnoticed by state lawmakers. A handful of states are now treating it as a recruiting problem rather than just a revenue question.
Arkansas moved first, becoming the initial income-tax state to exempt NIL earnings entirely. Mississippi lawmakers introduced their own version. The Mississippi bill cleared the state House 76-32 before stalling in the Senate Finance Committee, which declined to bring it to a floor vote. This leaves Arkansas as the only state that taxes income to offer student athletes this carve-out.
Mississippi wasn’t alone in trying. Similar exemption bills surfaced in Alabama, Louisiana, Georgia, Illinois, New Jersey, and South Carolina this year. While none reached a governor’s desk, progress has been made to help student athletes (and their athletic departments that are trying to recruit these student athletes) avoid taxes on NIL income.
Given the size of the gap this analysis finds between a Texas-based quarterback and a California-based one, and given that valuations that are themselves still climbing, the pressure is unlikely to fade. Consequently, Arkansas’s head start may not last as hoped.
The After-Tax NIL Valuation
Regardless of the NIL valuation, the country’s top college football players are learning what other independent contractors must learn: gross earnings and take-home pay are two very different numbers, and the gap between them is decided as much by geography as by talent. A student athletes zip code can be worth just as much to their after-tax bank account than a gap in market value, and a school’s tax address is increasingly a line item in its recruiting pitch. As NIL valuations keep climbing and states keep experimenting with carving athletes out of their tax base, that gap is a more useful aspect to watch each year.