I received a 1099-MISC for executing a mineral rights lease agreement (oil & gas). Should I report this as a "rent from a rental property" or as a "royalty" payment?

[rseiber1]

The 1099-Misc classifies the income as "rents", but when I enter this into TurboTax, it seems to assume that I am a landlord with tenants, expenses, etc.

[DawnC0 · Accepted solution]

Oil, gas, and timber are natural resource royalties.  Both Rental and Royalty Income go on Schedule E,  so your 1099-MISC should be entered by going to Federal (left menu), Wages and Income (top menu), Rentals, Royalties and Farms, then ''Rental Properties and Royalties (Sch E)'', instead of the 'Other Common Income' section.   If you enter it in the Other Common Income section, you will be prompted to link the 1099-MISC  to a schedule E property.  So you will need to complete that section at some point before you can file your return.  

If you go through the Rental and Royalty Income section first, you can set up the property information to reflect it as a gas and oil producing property before you enter the income..

[dpalderson]

When I check the "royalty property or payment" box as shown in the screen image my lease bonus income does not appear on Schedule E.

[jamesstanley1]

This answer is insufficient and should not be recommended.  An Oil and Gas Lease can produce both Rent for the rights to use the land and Royalty based on actual production.  TurboTax premium isn't calculating Rent into the income of a Schedule E for a given property.  Do 2 schedule E's need to be created?  However when Rental Property is selected the questions do not make sense for a piece of land being leased for oil & gas

[smartblonde43]

I'm experiencing the same thing. I'm not getting a royalty yet because they have not begun drilling yet, it's just leased pending that activity.

[vllarson69]

So can this question please be updated for 2018 Premier Turbo Tax,  I'm curious as well....Rental for me as well, no royalties on oil as of yet.  So please be specific how to handle this.  Also, does this qualify for a depletion, etc.  

[DawnC0]

This is an old post; please use this link to post a new question so that it gets the attention that it deserves.  

Ask the TurboTax Community 

[tnazz44]

I'm having the exact same issue and don't know how to file. I keep getting an error message.

[jwilson4]

Would love to get the answer to jamesstanley1's question a year ago.  2018 Home & Biz and I still have a problem with an error because I have royalties and rent for three different mineral rights - labeling them differently, and it doesn't want to correctly process the rent.

Income from rental real estate and income from royalties must be reported as separate properties on Schedule E.  HOW?

[arbo]

i rent part of my property for the gas company to run their pipes across, they sent me a 1099 for rent, how do I report this on my income tax

[Carl]

If you have a 1099-MISC that has income reported in both box 1 and box 2, then you will treat it as if you received two physically separate 1099-MISC forms, with one reporting income in box 1, and the other reporting the income in box 2.

Take note that when entering the 2nd one into TurboTax, your "description" for the box 2 1099-MISC must not be the same as the description for the box 1 1099-MISC. When done, the rental income of box 1 will be reported in column A of the SCH E, and the royalty income of box 2 will be reported in column B of the same SCH E.

[ghaakenson]

I do not understand.  I have samll income from oil and gas mineral rights lease in North Dakota.  I live in North Carolina.  Turbo tax asks for "Address"  the address on 1099 MISC is the company address in Texas.  I have had ND withholding taxes withheld.  It's SMALL amount.  I would just use the leasing companies address, except it is in a different state than the drilling.  This should not be that complicated.

[JamesG1]

This income should be reported under 'royalty'. 

I assume that the income is listed under box 2 of the 1099-Misc?

Investment income from property you own reports income on Schedule E.

Royalty income from your business reports income on Schedule C.

Either option allows you to 'name' the source of the royalty income.

Please see this TurboTax Help.

[ghaakenson]

Thank you.  The 1099 MISC shows state withholding and also production tax paid on the distribution, but there was no place in Turbo tax questionaire for me to put production tax paid.  Also, I still don't know how this is reported as income from North Dakota when the address of the oil and gas company is in Texas.  The total amount is <$500, so not major tax consequence.  I just don't want to trigger questions.

[DaveF1006]

If the 1099 MISC has an amount in Box 3, then it is royalty income that will generate a Schedule E. You can claim the Production Tax as a Schedule E expense in your return. now is the state withholding tax remitted to Texas or North Dakota.Where is land where the mineral rights are located?