Are Donations to NIL Collectives Tax Deductible?

Donations to NIL collectives are usually not tax deductible. In 2023 the IRS concluded that most name, image, and likeness collectives don’t qualify as tax-exempt charities because they exist to pay identifiable athletes rather than to serve a public purpose. A small number of collectives do hold valid 501(c)(3) recognition, and gifts to those can be deductible, but only if you meet the standard rules for charitable contributions and clear new hurdles that took effect in 2026.

Why Most NIL Collectives Aren’t Charities

The IRS Office of Chief Counsel spelled out its position in guidance memorandum AM 2023-004.¹ To qualify under Section 501(c)(3), an organization must operate for a public purpose, and any benefit flowing to private individuals has to be incidental. NIL collectives are built to route money to a specific group of athletes through endorsement deals, appearances, and social media campaigns. That’s direct, targeted private benefit, which is the opposite of incidental.

The IRS is actively enforcing this view, not just publishing it. The agency has denied exempt status to multiple collectives and flagged NIL as a compliance priority for its Tax Exempt and Government Entities division. If the collective isn’t recognized under Section 501(c)(3), gifts to it are not deductible as charitable contributions, no matter how the collective describes itself or its “donate” page.

Check the Collective’s Status Before You Give

Start with the legal form. Many collectives operate as for-profit LLCs, effectively marketing agencies matching businesses with athletes. Money paid to an LLC is never a deductible charitable contribution.²

Some collectives pair with an established 501(c)(3) through a fiscal sponsorship, so donations flow through the charity’s exempt umbrella.¹ The label doesn’t settle the question. The IRS looks at what the money actually funds, and if it still ends up paying athletes for endorsements, the private benefit problem returns.

Before you write a check, verify the organization in the IRS Tax Exempt Organization Search tool, which reflects Publication 78 data and shows revocations.³ If the collective isn’t in the database, your gift is not deductible regardless of what its website says.

When a Donation Can Actually Be Deducted

Assume a collective is legitimately recognized as a 501(c)(3) and appears in the IRS database. Deductibility then depends on how you file. You choose each year between the standard deduction and itemizing. For 2026 the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.⁴ Itemizing only helps when your combined deductible expenses beat that number.

Starting in 2026, the One Big Beautiful Bill Act lets non-itemizers deduct up to $1,000 in cash charitable gifts ($2,000 for joint filers) above the line.⁴ It applies to cash contributions to public charities, not property gifts or donor-advised funds. If you take the standard deduction and give $500 in cash to a qualifying collective, that’s a real tax benefit you couldn’t get before 2026.

Itemizers report contributions on Schedule A of Form 1040. Cash goes on line 11, non-cash on line 12.⁵

The 2026 AGI Floor and the Percentage Caps

Itemizers face a new obstacle in 2026. Only the portion of your charitable contributions that exceeds 0.5% of your adjusted gross income is deductible. On $200,000 of AGI, the first $1,000 of total giving produces no deduction. Everything above that threshold is deductible, subject to the usual caps. This floor didn’t exist before 2026 and was created by the One Big Beautiful Bill Act.

Above the floor, the deductible amount is capped as a share of AGI:

Most donors are writing cash checks, so the 60% ceiling rarely binds. The 0.5% floor is what will actually reduce or eliminate the deduction for modest gifts.

Perks, Merchandise, and Ticket Rights

Collectives often add donor perks: meet-and-greets, branded merchandise, exclusive events. When you receive something of value in return, the deductible amount drops by the fair market value of what you got. A $1,000 donation paired with a $200 merchandise package is a $800 deduction at most.⁸

When a quid pro quo contribution tops $75, the organization has to give you a written disclosure estimating the value of what you received and stating that your deduction is limited to the excess.⁸ Missing disclosures suggest the collective isn’t paying attention to the rules generally.

One perk eliminates the deduction outright. Federal law disallows any deduction for a payment that gives the donor the right to buy tickets or seating at a college athletic event, whatever the structure.⁶ Any collective still marketing ticket-linked “donations” as deductible is wrong.

The Business Expense Route

Business owners have a separate path that has nothing to do with charity. When a company pays an athlete for a real endorsement, promotional appearance, or social media campaign, the payment can be deductible as an ordinary and necessary business expense under Section 162.⁹ This is marketing spend, comparable to hiring any other spokesperson.

The payment has to make commercial sense. A local gym paying an athlete to appear in its ads is defensible. A consulting firm paying $50,000 for a single Instagram post is harder to justify as ordinary in that industry. The IRS also scrutinizes payments to family members, so a business owner paying their own athlete-child must show fair market value and a real commercial purpose, not a disguised transfer. Keep contracts, invoices, deliverables, and comparable-rate evidence in case the deduction is audited.

Records You Need to Keep

For any contribution of $250 or more, you need a written acknowledgment from the organization before you file. It must show the organization’s name, the cash amount, and whether you received anything in return, including a description and good-faith value estimate if you did.¹⁰

For cash gifts under $250, a bank record or written communication from the organization showing name, date, and amount is enough. A canceled check or credit card statement works.¹¹

Non-cash property worth more than $500 requires Form 8283 with your return, and gifts over $5,000 generally require a qualified appraisal.¹² This matters if you give appreciated stock instead of cash, which can avoid capital gains tax while still yielding a deduction at fair market value. The trade-off is a 30% AGI cap and more paperwork.

What Happens If You Claim a Deduction You Don’t Qualify For

Deducting a gift to a collective that isn’t actually tax-exempt exposes you to a 20% accuracy-related penalty on the resulting underpayment.¹³ A disallowed $10,000 deduction at a 24% marginal rate produces $2,400 in additional tax plus a $480 penalty, with interest running on both.

The penalty applies to negligence, disregard of IRS rules, or a substantial understatement of tax. Claiming a deduction without checking the IRS search tool falls within negligence, and the agency’s public enforcement stance makes ignorance a weaker defense every year. Verifying status before you give is the only reliable way to know whether a deduction is on the table at all.

1
Internal Revenue Service. AM 2023-004 – Whether Operation of an NIL Collective Furthers an Exempt Purpose Under Section 501(c)(3)
2
Internal Revenue Service. Limited Liability Company (LLC)
3
Internal Revenue Service. Tax Exempt Organization Search
4
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
5
Internal Revenue Service. Publication 526 (2025), Charitable Contributions
6
Office of the Law Revision Counsel. 26 USC 170 – Charitable, Etc., Contributions and Gifts
7
Internal Revenue Service. Charitable Contribution Deductions
8
Internal Revenue Service. Charitable Contributions – Quid Pro Quo Contributions
9
Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
10
Internal Revenue Service. Charitable Contributions – Written Acknowledgments
11
Internal Revenue Service. Topic No. 506, Charitable Contributions
12
Internal Revenue Service. Instructions for Form 8283
13
Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments