How QBI + NIL Can Build Wealth Beyond the Game

Why This Matters: Athletes today are building brands, not just stats. Whether you're a college athlete making NIL money or a pro building your off-field empire, how you structure your income could save you thousands, year after year. The Qualified Business Income (QBI) deduction, extended under the 2025 Big Beautiful Bill, gives athletes a chance to reduce taxable income from business ventures. But there’s a catch: you have to structure things right. This isn’t just a tax trick. It’s the difference between keeping your earnings or overpaying the IRS. And as NIL grows into a billion-dollar market, the athletes who understand structure will be the ones who build generational wealth

QBI 101 for Athletes: The Qualified Business Income (QBI) deduction allows eligible taxpayers to deduct up to 20% of their qualified business income from federal taxable income. This deduction applies to income earned through sole proprietorships, partnerships, S corporations, and LLCs taxed as pass-through entities. However, it does not apply to income earned through C corporations. The deduction begins to phase out once taxable income exceeds $191,950 for single filers and $383,900 for married filers, with these thresholds adjusted annually for inflation. While the 2025 Big Beautiful Bill did not alter the 20% deduction rate, it made the provision permanent and preserved both the income phaseouts and the limitations for Specified Service Trades or Businesses (SSTBs).

SSTB - The Sneaky Limit on Athlete Income: The IRS classifies income earned from services that rely on an individual’s reputation or skill as Specified Service Trade or Business (SSTB) income. In simpler terms, if the income is earned primarily because of who the person is rather than the business infrastructure behind it, it likely falls under the SSTB category. Common examples include brand endorsement deals, paid appearances, social media partnerships, personal coaching, clinics, and training camps. While SSTB income can qualify for the QBI deduction below certain income thresholds, once an individual’s taxable income exceeds those limits, the deduction begins to phase out and eventually disappears. This means that as an athlete's earning power grows, their ability to claim the QBI deduction on SSTB income diminishes, unless proactive planning is in place.

The Opportunity: Not all NIL income is classified as SSTB. If the income is not directly tied to personal services such as passive royalties, merchandise sales, or brand licensing arrangements, it may fall outside the SSTB category. This distinction matters because non-SSTB income can remain eligible for the full QBI deduction, even when the taxpayer’s income exceeds the IRS phaseout thresholds. For example, operating a Shopify store that sells branded gear without providing direct services, licensing an athlete’s name to a video game company, or owning part of a media platform or podcast that employs other contributors may all generate QBI-eligible income. These revenue streams can provide long-term tax advantages when properly structured.

Pro Move - Separate Income Streams: Athletes who earn multiple types of NIL income should consider segmenting those earnings across separate legal entities. This approach helps prevent SSTB income from “contaminating” income that may otherwise qualify for the QBI deduction. Proper segmentation also strengthens the athlete’s position in the event of an IRS audit and lays a foundation for long-term brand ownership by creating clear distinctions between different lines of business. However, it’s important to note that the IRS continues to scrutinize multi-entity arrangements. To preserve QBI eligibility, each business must have operational substance, distinct bank accounts, independent contracts, proper bookkeeping, and real economic activity, not just paperwork filed for appearance.

Don’t Overlook State Income Tax: NIL income isn’t just a federal issue. It’s taxable in every state where you earn it, whether through appearances, digital sales, or endorsements. And while QBI gives you a 20% federal deduction, most states don’t offer the same benefit. That means: You may owe state taxes in multiple jurisdictions based on where your NIL activity occurred or where customers live. You could face multi-state filing requirements, even if your home state doesn’t tax income. Most states don’t conform to the QBI deduction, so your state tax bill may be higher than expected.

Why This Isn’t Just For The Big Guys: NIL income could be a big financial opportunity that is short-lived: The average college athletic career is 4 years or less. Most athletes don’t go pro. Even pros often peak in their 20s. But IP lasts. Your name, image, voice, and brand can generate licensing income, royalties, and product sales long after you hang up your cleats. That’s why structuring NIL income isn’t just for the stars. It’s for: The D1 volleyball player running a merch store, the Olympic hopeful licensing her name to a swimwear line, the D3 football player creating a YouTube channel about strength training. If you can separate the skill-based earnings from the scalable assets, you can extend your earning window for decades.

Think Beyond the Game - Build a Business That Lasts: The NIL era has turned athletes into entrepreneurs almost overnight. But if you want to thrive in this new landscape, it’s not enough to sign deals and cash checks. You have to structure like an owner. Think like a strategist. File like a professional. Here’s the truth: You don’t need to be the highest-paid player to become the most financially powerful. What matters is how your income is earned, how it’s categorized, and how it’s sustained. The IRS doesn’t care how many followers you have or how many points you scored. It cares about whether your NIL income is tied to your performance or your platform. Whether your entities are real businesses or paper-thin shells. Whether you separate your IP from your identity and structure accordingly. Skill fades. IP doesn’t. And now that the QBI deduction has been made permanent, athletes and their advisors should be more intentional than ever. This isn’t a fleeting tax perk; it’s a foundational tool that rewards smart structuring, operational clarity, and long-term thinking. For athletes, whose peak earnings years are often compressed into a few short seasons, maximizing the QBI deduction could be the difference between temporary income and lasting wealth. When structure meets strategy, NIL becomes more than a moment; it becomes a business. The window for NIL earnings is short. The window to structure them wisely is even shorter.

Start now. Play smarter. Win longer.