HUSTLE Act Creates Tax-Free NIL Accounts for College Athletes, Caps Agent Fees at 5%

The “Helping Undergraduate Students Thrive with Long-Term Earnings Act,” or HUSTLE Act, is setting up a whole new financial structure for college athletes making money off their name, image, and likeness (NIL). Essentially, it creates a new type of tax-advantaged savings vehicle called the NIL Investment Account. Athletes can contribute their NIL earnings to this account, and those contributions are excluded from their gross income for tax purposes, similar to how an IRA works. The goal is to encourage athletes—who often have a short, intense earning window—to save for the long term.

The NIL Account: A Tax Break with Training Wheels

Think of the NIL Investment Account as a specialized 529 plan or HSA, but for student athletes' endorsement money. An athlete can contribute up to the annual gift tax exclusion limit (currently $18,000) of their qualified NIL income each year, and they can do this for the first five years they are enrolled and earning. This means the money goes into the account tax-free. For an athlete making serious money, this is a huge deal—they get to defer taxes on their income, and they don't even have to pay self-employment tax on the contributed amount in the year they earn it.

But here’s the catch, and it’s a big one: the distribution rules are complex and designed to lock that money up until graduation. If an athlete needs to pull money out before they graduate or transfer to a non-participating school, that distribution is taxed as ordinary income plus a hefty 10% penalty. It’s a major disincentive for early withdrawals. However, if they wait until after graduation, they get a break: distributions up to a certain yearly limit (tied to the capital gains threshold for a single individual) are taxed at the lower long-term capital gains rate. Any amount above that yearly limit is still hit with the ordinary income tax rate and the 10% penalty. This structure heavily rewards patience and long-term savings, but it punishes athletes who might need liquidity sooner, perhaps due to a family emergency or unexpected expenses.

Agent Reform: Capping the Cut and Eliminating Waivers

Beyond the tax accounts, the HUSTLE Act takes a hard swing at regulating sports agents who work with student athletes on NIL deals. The bill amends the Sports Agent Responsibility and Trust Act (SPARTA) to impose strict new rules. Crucially, it caps agent fees for any student athlete endorsement contract at 5% of the contract’s value. This is a massive consumer protection measure, ensuring young athletes keep the vast majority of their earnings. Agents must also register with a state and certify that registration to the relevant athletic association (like the NCAA).

Perhaps the most powerful change for the athlete is the creation of a private right of action. This means a student athlete can now sue an agent directly in federal or state court if the agent violates the Act—for example, by charging more than the 5% fee cap or misrepresenting an opportunity. To ensure athletes actually get their day in court, the bill explicitly invalidates any pre-dispute arbitration agreements or joint-action waivers. In plain English: an agent can’t make an athlete sign away their right to sue before a dispute even happens. If you’re an athlete, this provision is your new legal shield.

Administration and Implementation Hurdles

While the tax structure is beneficial, the implementation relies heavily on coordination between colleges, the Treasury Department, and the athletes themselves. The Secretary of the Treasury, in consultation with the Secretary of Education, gets significant power to define what counts as an “eligible athlete” and to establish verification procedures. For colleges that participate, they have to certify an athlete’s graduation or transfer status directly to the account trustee, adding administrative burden. If a college decides to opt out of participation, that revocation isn't effective for a full year, giving athletes some protection.

Finally, the bill offers a pathway for athletes to roll over their NIL Investment Account into a standard IRA or Roth IRA after they stop being an eligible athlete, with a lifetime conversion cap of $35,000. This reinforces the long-term savings goal, helping athletes transition from college earnings to professional life. The entire tax section of the bill is set to take effect for taxable years starting after December 31, 2025, giving the Treasury time to sort out the complex rules.