Bloomberg reported that back in 2018, an LLC controlled by LeBron James borrowed nearly $300 million against his future Nike earnings. A lot of the coverage called it a genius tax move and stopped there. I wrote about it on the Fusion CPA blog because the mechanics are more useful than the headline, and they apply to a lot more people than one basketball player.
The loan itself isn't taxable. Borrowed money comes with an equal obligation to pay it back, so your wealth hasn't gone up. It's the same rule that keeps a mortgage or a business line of credit off your return. The Nike payments that service the debt are still ordinary income in the year they're paid, though. What borrowing changes is the timing of the cash. The tax shows up year by year, the same as before.
Selling the income stream outright would have gone worse. Tax law going back to 1930 treats a lump-sum sale of future personal-services income as ordinary income, so the seller doesn't get capital gain rates. That's the real reason borrowing beat selling here.
The cost worth watching is the interest. Whether it's deductible depends on what the borrowed money is used for. The collateral doesn't come into it. Invest the proceeds and the interest may be deductible against investment income. Spend them on a house or a lifestyle and it generally isn't.
If you're a performer, a creator or anyone else with contracted future income, the same choice comes up at every scale: collect it as it arrives, borrow against it, or sell it. I compared all three paths in the full piece. Read the full article on the Fusion CPA blog