The Expensive Truth: The Possible Tax Implications Related to Scholarship and Cost of Attendance Payments for Athletes

  • Patrick Michael Tutka Niagara University
  • Dylan Williams University of Alabama


The result from O’Bannon v. NCAA should provide NCAA student-athletes with unprecedented financial benefits such as cost of attendance (COA) scholarships. While these benefits will support student-athletes, there are potential unintended consequences surrounding the increase in financial support, including federal and state income taxes. Athletic scholarships have traditionally been classified as qualified scholarships under Revenue Ruling 77–263. However, by providing a COA payment, the scholarship transforms from an educational benefit to a quid pro quo contractual agreement. As such, student-athletes may be forced to pay income taxes on their disqualified scholarship. The purpose of this study is to determine the potential taxability of the COA qualified scholarships. This study analyzes the Internal Revenue Code and Treasury Regulations to determine if the COA scholarship meets the requirements for a qualified scholarship. In addition, the present work provides potential tax implications for student-athletes receiving COA scholarships at both the federal and state levels.