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The NIL Tax Edge Behind Miami And Indiana’s Football Championship Run

The Miami Hurricanes will face off against top-ranked Indiana Hoosiers in the College Football National Championship on Monday, January 19. This season has shown fans that anything can happen as neither the Hurricanes nor the Hoosiers entered the season as frontrunners to make it this far. However, being able to pay players for their NIL, and effectively paying them more on an after-tax basis may have contributed to the Hurricanes and Hoosiers successes this season. As we now enter the college football national championship, this competitive advantage appears to be on full display.

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Despite all players facing a standardized federal income tax rate, significant variation exists in the players’ state income taxes owed. In total, nine states – Alaska, Florida, Nevada, New Hampshire, Tennessee, Texas, Washington, and Wyoming – do not impose tax on income. In addition, Arkansas became the first state in 2025 to enact a statutory exemption for NIL income, meaning college athletes there owe no Arkansas state tax on their NIL earnings even though the state otherwise imposes an individual income tax, as I previously reported in a Forbes contributor article. Among states that impose a tax on NIL income, some states, like Indiana impose a low income tax rate of 3%, whereas other states, like California, impose a high income tax rate of 13.3%.

While there is a question as to whether players even notice these different tax rates, this question was put to rest on January 10. An X social media post by the University of Central Florida football team went viral as they claimed that athletes should consider choosing to play for their school because they would not have to pay state income taxes should the players choose their school. Over a dozen schools, like the University of Houston, the University of North Texas, and the University of Nevada Las Vegas followed suit with similar posts.

The mere fact that schools are advertising their state income tax advantages underscores the fact that schools view this as a competitive advantage (or disadvantage) when it comes to their teams’ performances. As we now enter the college football national championship, this competitive advantage is on full display.

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On the flip side, the state of Indiana imposes a tax on income. However, Indiana University’s advantage is that this state income tax rate of 3% is among the lowest in the country. Thus, Indiana University’s Heisman Trophy winning quarterback, Fernando Mendoza, who has a $2.6 million NIL valuation must pay some of his earnings in state income taxes. However, this amount likely does not eclipse six figures.

LINK

A bill exempting NIL earnings from state taxes was proposed in the last Louisiana Legislative session, but didn’t receive a floor vote. I’m betting now it comes back in the 2026 session with more momentum, especially with Gov Landry seemingly fully invested in LSU football.

So Bill making $3 Million in NIL, along with his free tuition, room and board, playing QB at LSU won’t be subject to paying state income taxes. However, George bartending and waiting tables at Gino’s in BR to help pay for his college expenses will have his earnings subject to state income taxes.