Scenario 1
Bobby Curveball Jr. was a star pitcher on his high school baseball team just last year. So much so that the University of Arizona offered him a partial scholarship to come pitch for them after he graduated. In his freshman year at Arizona Bobby was a relief pitcher and by mid-year began to really improve his game. By the end of the year he had become one of the team’s better pitchers coming out of the bullpen. After the season was over and he finished his freshman year Bobby decided to stay at the university all summer and work on improving his game. The problem is Jr. needs to cover some expenses.
Bobby is in luck. The university baseball coach recommended Bobby to a local businessman that is looking for a Division 1 pitcher to throw balls at one of the vendor booths. Bobby is now being offered NIL money. How…you ask? The event promoter is using Bobby Curveball Jr.’s name on the promotional materials and stating he is a current pitcher for the University of Arizona. He is being paid by the event promoter $2,000.
What are the considerations and ramifications for his parents before he accepts the offer?
HTH Insights
- If Bobby’s NIL earnings grow, they may no longer be able to have him qualify as a dependent. To be claimed as a dependent, you generally must provide more than half of your child’s financial support.
- In addition, if you can no longer claim your child as a dependent, you may also lose your ability to claim education-related tax credits, such as the American Opportunity Tax Credit (AOTC). Finally, since taxable income is reported on the Free Application for Federal Student Aid (FAFSA), NIL earnings could potentially reduce your child’s eligibility for any need-based financial aid, including any future scholarships and grants.