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Alston Awards and Their Tax Implications

Written by: Ryan (he/him)

2 min read | Published: January 23, 2024

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In July 2021, a new policy was introduced allowing student-athletes to earn money from their name, image, and likeness. These NIL deals are the primary way student-athletes earn money, but there is another opportunity for income deriving from a lawsuit: Alston awards. Alston awards provide student-athletes up to $5,980 annually — which is more than most student-athletes make with their NIL deals. A study done by an NIL technology company found that Division I athletes earned an average of $3,000 in NIL deals. Alston awards grant students funds to use for personal and school expenses, but where did the awards come from?

The case

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 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.

While the Alston awards and NIL deals are a great way for student-athletes to earn income, a major issue is these funds are not taxed before they’re disbursed. 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 and Alston award money before April’s tax filing deadline comes around. The general rule is the more money a person earns, the more taxes they will pay.

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, the athlete will need to use a 1099-K form instead. There will be multiple forms depending on the number of brand deals the 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/

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/

https://www.cbsnews.com/news/taxact-expert-simplifies-taxes-for-college-athletes-earning-nil-income-paid-content/#:~:text=NIL%20income%20is%20taxable%2C%20meaning,and%20%22non%2Dcash.%22

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