key takeaways
- Zero income is usually taxable at both the federal and state levels, depending on where you earn it.
- Non-cash compensation related to void deals, such as free merchandise or trips, is also considered taxable income.
- Where you live, play and sign deals can all affect your final tax bill.
I was talking to a college athlete friend who had just got his first NIL deal. This was a big victory for him. Extra money, more visibility. But before she could celebrate, she was on Google at midnight trying to figure out how much money she would have.
It takes a lot of processing, especially if you are new to paying taxes. Between different regulations and different taxes, the math can get complicated quickly. The good news is that understanding how it applies to you will help make it less burdensome.
Why You Can Have Zero Income and Reduce Taxes How Much You Keep
Zero (name, image and likeness) income comes from deals and opportunities student athletes receive based on their personal brand. Whether it’s actual payment in dollars or non-cash compensation in the form of merchandise or trips, the IRS treats it as taxable income.
This means that zero income is likely to occur subject to:
- federal income tax
- self employment tax
Whether they are subject to state income tax depends on the circumstances. To understand how it all works, it’s worth starting with the basics.
Zero Tax FAQ
Do I have to pay state tax on zero income?
In most cases, yes. Although there are some places where no state income taxIn most states, zero income is taxed the same way as salary and freelance income.
Do void deals count as self-employment income?
Yes. The IRS generally considers zero income to be self-employment income, so earning at least $400 for the year (after deduction) are subject to federal Self-employment tax of 15.3%. States assess income tax on these earnings.
If you expect to owe $1,000 or more, the IRS recommends making quarterly estimated payments. Form 1040-ES.
Does it depend on where I live and play?
Yes. And this is where it can get complicated. Unless you live in a state that doesn’t tax income, you’ll probably be taxed by your home state. If you earn money involving another state, you may need to file and claim the credit (or allocate taxes) in more than one state to avoid being taxed twice.
Should I report zero income when I file?
Yes. Your zero income must be reported on Schedule C when you file Form 1040. You may receive a 1099 form to report income, but it is important to report all income, even if you do not receive a 1099.
What if I am an international student earning zero income?
If you are an international student, you may be eligible to receive zero income, and you must pay US taxes on that income. Your filing requirements will likely differ, depending on your situation. It is advisable to check your specific situation and what it may mean before you start earning to avoid falling foul of the rules.
Understanding Taxes on Zero Income
Zero deals can be a big financial step, especially if you are able to keep more of your earnings. Planning in advance can help you avoid paying more than you need to, and keep that money in your pocket as a start to your future.
See what you might be able to claim with it Self Employed Calculator And get a clear picture of your zero taxes before filing your tax return.