Gavin McKenna and the Future of NIL for Canadian Athletes

Gavin McKenna is widely expected to be selected first in the 2026 NHL draft.

He represents hope and the promise of a better future for the team that's lucky enough to win the 2026 NHL Draft lottery. But currently, Gavin McKenna represents something else entirely in hockey and for Canadian athletes, in general, playing in the National Collegiate Athletic association (NCAA). McKenna stands to become the first Canadian student-athlete to profit substantially from their name, image and likeness (NIL) since the NCAA first allowed student athletes to do so on July 1, 2021. McKenna, in choosing to attend and play for Penn State University, is reportedly receiving a record-setting $700,000 NIL deal for the 2025-26 season.

But what kind of tax consequences will a Canadian resident athlete, like McKenna, who is scheduled to earn income from his name, image, and likeness (NIL) through advertising or other campaigns, face in both the United States and Canada? Beyond a potential tax bill, what else should a Canadian athlete and his representation be considering?

The tax treatment in each country is described below:

1. U.S. Taxation of NIL Income for Canadian Residents

   1. NIL income earned by a Canadian resident athlete from activities performed in the U.S. (such as advertising, endorsements, or appearances) will be subject to tax in the U.S., since NIL income is generally considered U.S.-source income.

   2. U.S. payers are typically required to withhold 30% on payments to non-resident aliens unless a tax treaty provides for a reduced rate or exemption.

   3. The athlete should file a U.S. non-resident tax return (Form 1040-NR) to report and potentially claim a refund if too much tax was withheld or to claim treaty benefits.

   4. Many states tax nonresidents on income earned from services performed within the state, including NIL income. Some states have specific exemptions for student-athletes’ NIL income, but this varies by state.

      
      

2. Canadian Taxation of NIL Income for Canadian Residents

   1. Under Canadian tax law, residents of Canada are taxed on their worldwide income, including any NIL income earned while attending a U.S. school.

   2. NIL income is generally considered business income or income from a profession, not employment income, even if the athlete is otherwise a student or an employee in another context.

   3. If the NIL income is considered business income, the athlete may deduct reasonable expenses incurred to earn that income, subject to the general limitations in the Income Tax Act (e.g., personal and living expenses are not deductible, except for certain travel expenses.)

   4. Canada generally allows a foreign tax credit for U.S. tax paid on the same income, up to the amount of Canadian tax otherwise payable on that income. The athlete must report the U.S. tax paid and claim the credit on their Canadian tax return.

Practical Considerations

Canadian college athletes are not on a level playing field with their American teammates when it comes to NIL. While their American teammates can sign autographs for money, run summer camps, or appear in local car dealership commercials, Canadian players face significant restrictions due to their visa status.

On American soil:

• Can't actively work NIL deals (F-1 student visas prohibit it)

• Can earn passive income (think jersey sales, video game appearances)

• No paid promotional work, social media campaigns, or personal appearances

• Can't run hockey or basketball camps or give paid instructional lessons

Back home in Canada:

• Can sign deals with Canadian companies *

• Can do promotional work during school breaks

• Some athletes are literally flying home to fulfill sponsorship obligations

• Can work camps or clinics while in Canada
  

* UConn's Aaliyah Edwards from Kingston, Ontario recently signed with Adidas Canada - not Adidas U.S. That distinction matters because it's structured specifically to comply with US visa restrictions.

Changes on the Horizon:

• Congress is looking at bipartisan legislation to adjust F-1 visa rules

• Universities are pushing for clearer guidelines from immigration officials

• More Canadian companies are exploring partnerships with college athletes

• Schools are developing compliance departments just for international NIL issues

The Gray Areas:

• Social media posts from Canada vs. U.S.

• Gaming streams and online content

• Appearances via video call

• Autograph sessions during home visits

Bottom Line:

There's still a lot to sort through. NIL rules are evolving and what's true today might change tomorrow. But for now, Canadian players heading to NCAA need to understand these limitations and plan accordingly.

How Trowbridge Can Help

At Trowbridge Professional Corporation, our team of tax experts specializes in optimizing tax strategies and helping clients navigate changing tax policies. If you're interested in learning more about how we can assist you in optimizing your tax planning strategies, we invite you to schedule a call with us today. Our dedicated professionals are here to guide you through the process and answer any questions you may have.