Investors & landlords
You deduct the expenses after you report the royalty income. Royalty income is typically reported on a Form 1099-MISC in box 2. You report that in the Wages and Income section of TurboTax, then Other Common Income, then Income from Form 1099-MISC. In that section, you will enter a name for the royalty activity and be instructed to visit the Business Income and Expenses section where you will see the royalty activity you set up and you can enter your business deductions there:
