Your child has an offer and everyone in the room is a stranger. Here is what actually needs deciding, in the order it needs deciding.
Schedule a CallThree things need to happen before the first dollar is spent: a lawyer reads the contract, you decide where the money is held and who controls it, and a tax reserve is funded. Everything else can wait. Nothing else should happen first.
You are being approached by agents, marketers, collectives, and advisors at the same time, most of whom are paid by someone other than you. This page is written to be useful whether or not you ever call us.
Before the money question, the contract question. Get a lawyer who has read NIL agreements before, and have them look at these specifically.
Under NCAA rules your athlete must disclose deals and the professional service providers involved, including the terms of what those providers are paid. Deals of $600 or more go through the NIL Go clearinghouse operated by the College Sports Commission. As of July 1, 2026, deals between $600 and $15,000 are exempt from full compensation-range review unless the athlete exceeds $50,000 in associated-entity deals in an academic year. The NCAA maintains the current rules here.
This is the decision families skip and regret. A custodial account is easy to open and hands full control to your child at an age set by state law. An account in your child's own name once they are an adult is theirs entirely. A trust keeps control but costs money to set up and administer. There is no universally right answer, and there is a very wrong process, which is defaulting into whichever one a bank opened fastest.
NIL income arrives with nothing withheld. Self-employment tax alone is 15.3 percent of net earnings, before any income tax. A reserve of 30 to 40 percent of net, moved out the day money arrives, is a reasonable working assumption. The IRS generally expects quarterly estimated payments once you expect to owe $1,000 or more. Full mechanics and a worked example are on the NIL tax page.
Your child's NIL income can change your tax situation, not only theirs. The dependency tests turn partly on who provides more than half of the child's support. A high-earning athlete who pays their own way can fail that test, costing you credits you were counting on. Model this before December, not in April.
NIL income affects the FAFSA twice: once as income, reduced by a student income protection allowance of $11,770 for 2026-27 with 50 percent of the excess counted, and again as a student asset at 20 percent with no asset protection allowance. For 2026-27 a Student Aid Index of $14,790 or above ends Pell eligibility, per the Federal Student Aid Handbook. For families where aid is material, this is worth modeling before signing, because the aid loss can exceed a small deal.
You will find confident and contradictory answers on this. Here is the accurate version.
The kiddie tax applies to a child's unearned income above $2,700 for 2026, taxing it at the parents' rate. The IRS defines unearned income as generally all income other than amounts received as pay for work actually performed.
So the deal structure determines the answer. That is a good reason to read the agreement with someone who knows the difference before signing it.
Rules vary by state and they are moving. Indiana changed on this in 2026: the IHSAA approved Personal Branding Activities on May 4, 2026, effective for the 2026-27 school year, with real limits on school affiliation. Many national trackers still list Indiana as prohibiting high school NIL, which is out of date. We wrote the current rules up at Indiana high school NIL rules.
Federal tax rules do not have a minor exemption. Self-employment tax applies at $400 of net earnings regardless of age.
Our full vetting checklist is at how to vet an advisor for an athlete.
A teenager who learns to hold money well is set up for a life that has very little to do with whether the athletic career works out. Most of them will not play professionally. All of them will earn and spend for the next fifty years. The habits formed around a first NIL check outlast the check by decades, which is a better reason to get this right than the dollar amount is.
Remnant Wealth LLC does not provide legal or tax advice. This page is general educational information, not personalized advice, and tax rules change. Figures cited are current as of August 2026 and are linked to their sources. Work with your own CPA and attorney before acting on anything here.
A lawyer reads it before anyone signs. Term, exclusivity, likeness rights, payment terms, obligations, and who else gets paid.
Custodial, individual, or trust. Each hands control to a different person at a different time, and defaulting is itself a decision.
30 to 40 percent of net, moved out on arrival, with quarterly estimated payments scheduled rather than discovered.
Run before December. Both your return and your child's can change, and so can the financial aid package.
Read the whole agreement before anyone signs, including the term length, exclusivity, and what happens if your child transfers or stops playing. Then decide, in advance, where the money will go and who controls the account. The contract review is a lawyer's job and the money structure is a planner's job, and doing them in that order costs nothing and prevents most of the problems that follow.
Usually yes, but it depends on support. The dependency tests turn on whether your child provided more than half of their own support during the year. An athlete earning substantial NIL money and paying their own way can fail that test, which changes your return and theirs. This is worth modeling with your CPA before the year ends, not after.
It can, in two places. NIL income raises the student's Student Aid Index after an income protection allowance of $11,770 for 2026-27, with 50 percent of the excess counted. Money the student then saves is assessed again as a student asset at 20 percent. A Student Aid Index of $14,790 or above eliminates Pell eligibility for 2026-27. Where the money is held and when it lands are real planning levers.
In most states a minor cannot be held to a contract the same way an adult can, which is exactly why brands want a parent or guardian to sign or co-sign. Get a lawyer on the contract. On the money side, the account structure you choose determines who controls the funds and when, and some structures hand full control to your child at eighteen or twenty-one whether or not that is the plan. Decide that deliberately.
Those solve different problems, and neither is automatically right. An LLC does not lower taxes on its own: the IRS treats a single-member LLC as disregarded from its owner. A custodial account is simple but transfers control to the child at a set age. A trust gives control but costs money to establish and maintain. The right answer depends on how much money there is and what you are actually worried about.
Generally not to income earned for services performed, which is treated as earned income. It can apply to NIL royalty income and to the taxable portion of an athletic scholarship, both of which are unearned income, above the $2,700 threshold for 2026. Much of what circulates online on this point is wrong in one direction or the other.
The portion covering tuition, required fees, books, and required equipment is generally tax free for a degree candidate. The portion covering room and board is taxable, and it counts as unearned income for kiddie tax purposes. Most families are unaware of this entirely.
Sometimes, and it has to be real. Compensation for genuine services actually performed, at a reasonable rate, documented. Paying a parent a fee that does not correspond to real work is a problem, not a strategy. Talk to a CPA before setting any arrangement like this up.
Schedule a complimentary call. We will walk through what you are actually solving for, whether that is a first tax bill, a first big contract, or what happens after the last one.
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