Team Pay Is W-2 Income
If you're under contract with a professional team, your league salary and most signing bonuses are treated as employee wages. The team withholds federal income tax, state income tax (often in multiple states, since you owe "jock tax" in every state where you play a game), Social Security, and Medicare. That income shows up on a Form W-2 each January, same as any other employee.
Signing bonuses are usually still W-2 wages, but they can be withheld differently than regular salary. Some bonuses qualify for a lower federal withholding rate if they're paid separately from salary and meet IRS timing rules, but they're still wages, not self-employment income, unless your contract specifically structures the payment as a separate inducement fee outside the employment relationship. Read your contract or ask your agent how the bonus is classified, because that affects your withholding, not your tax bracket.
Endorsements and NIL Are 1099 Income
Anything you earn outside your player contract is a different story. Endorsement deals, sponsorship money, appearance fees, autograph and memorabilia signings, and NIL (name, image, likeness) payments are almost always paid to you as an independent contractor. Companies and collectives that pay you $600 or more in a year are required to send you a Form 1099-NEC. Payment platforms may instead send a Form 1099-K if you're paid through a third party processor.
This income is not wages. It's self-employment income, reported on Schedule C of your Form 1040, and it's subject to self-employment tax of 15.3% on top of ordinary income tax. Self-employment tax covers the Social Security and Medicare contributions that an employer would normally split with you, but here you're both the employer and the employee.
Why the Difference Matters for Your Taxes
The W-2 versus 1099 split changes what you can deduct and when you have to pay. On the W-2 side, your team withholds taxes automatically, so you rarely owe quarterly estimates on that portion. On the 1099 side, nothing is withheld, so you're responsible for making quarterly estimated tax payments using Form 1040-ES, typically due in April, June, September, and January.
Deductions work differently too. Agent fees, marketing team costs, and travel tied to endorsement work can be deducted against your Schedule C income, reducing both income tax and self-employment tax. Those same fees can't be deducted against W-2 salary under current federal rules, since unreimbursed employee expenses are not deductible for most workers.
Because many athletes have both income types in the same year, your tax return will likely include a W-2 for team pay and one or more 1099s for everything else. Keeping the two streams separate, with separate records for expenses and separate estimated payments for the 1099 side, is the difference between an accurate return and a costly surprise when the season ends and the income doesn't.