Have you heard about the potential for high school and college athletes to make money through their Name, Image, and Likeness (NIL)? Well, aside from NIL deals, there is another way for athletes to earn called Alston Awards.
Alston Awards are a form of compensation for college athletes that were permitted following the NCAA vs. Alston lawsuit starting in August 2020. These awards are provided directly by universities for academic-related expenses, with amounts up to $5,980 per year. While not as widely discussed as NIL earnings, for some athletes, Alston Awards may actually exceed what they earn from NIL deals throughout their college career.
The specific amount of the award and the requirements to receive it vary by university. Some institutions may mandate attending tax and financial education sessions while others require maintaining a certain GPA. It is essential to understand that, just like any form of compensation, there may be tax implications associated with Alston Awards.
As for the tax aspect, Alston Awards should generally be tax-free if used for qualified education expenses, much like scholarships or grants. To qualify as tax-free, the award must meet certain criteria, including being used solely for education-related costs and not exceeding the total qualified education expenses.
However, if the funds are used for expenses like room and board, travel, or equipment not required for enrollment, these portions may be taxable. If there is a taxable portion, it could impact your overall tax liability, especially when combined with any earnings from NIL deals.
Fear not, though, as there are ways to mitigate potential tax obligations. You can deduct related expenses from your NIL deals, such as marketing and advertising costs, to lower your taxable income. Additionally, you may be eligible for education tax benefits like the American Opportunity Tax Credit or the Lifetime Learning Credit, further reducing your tax liability.
Navigating the complexities of NCAA athlete compensation and taxes can be challenging, but TurboTax is here to help. Whether you choose to file your taxes independently or with the assistance of a TurboTax expert, rest assured that youβll maximize your tax savings and get the refund you deserve. With TurboTax, you can confidently make every move count when it comes to your taxes.
