Oil & Gas Royalites: Other Deductions and Productions Taxes deductions

Forum|Forum|1 year ago
March 12, 2025
2 replies
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I have a 1099-MISC for oil/gas royalties. The only amount shown on the 1099 is "Royalties (Box 2)". The statement also shows "Other Deductions" and "Production taxes" amounts which account for almost half the total royalties amount. Can these amounts be deducted? If so, how & where?

Also, can I deduct taxes paid to the county where the wells are located? The wells are located in West Virginia. I live in Texas.

Ask the Experts - FFB - Mar 2025

DawnC

Level 15

Use the instructions in the link below to enter your royalty income on 1099-misc. After you enter the income, you will move to the expenses section where you can deduct your expenses. You will be able to enter production taxes as well as other taxes and deductions related to the royalty income.

How do I enter a 1099-MISC for royalty income?

Basic tax reporting oil and gas 1099-MISC royalties

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tpclark

Level 2

I also have this question and the links did not provide the answer on where to report the deductions. I am trying to report it on a business return.

Thank you in advance.

CesarJ

Level 6

To report Oil & Gas Royalties deductions including Other Deductions and Production Taxes in TurboTax, use the Rentals, Royalties, and Farm section in the Wages & Income area.

To enter these deductions:
1. Go to the Wages & Income section.
2. Scroll down to Rental Properties and Royalties (Schedule E) and select Start or Update.
3. Enter your royalty income from your oil and gas properties.
4. For deductions like Other Deductions and Production Taxes related to your royalties, TurboTax allows you to enter these as expenses on Schedule E.
5. You can find and add these expenses under the expense categories like Other expenses or use the option to add other deduction types.

@tpclark

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Mike9241

Level 15

something important that's not on the 1099-MISC - the Depletion! deduction. To calculate that you'll have to go to the royalty website. It'll have either a depletion calculator or a booklet that tells you how to compute this deduction. Do you pay the taxes directly to WV or are they deducted from your royalty payments?

the royalties are reported on Schedule E - gross (box 2) and then the deductions

"Other Deductions" and "Production taxes" amounts which account for almost half the total royalties amount. Can these amounts be deducted? YES on Schedule E. As for the county taxes if paid directly to them they would be deductible but if deducted from the royalty payment, they're probably reflected on that 1099

Mike9241