I received a 1099-misc for oil refinery royalties that inherited from my parents. TurboTax online is asking for the location and if it’s a QBI.

[bobi456]

The only location I have is on the 1099-MISC. I’m not sure about the nature of the actual property just that I get royalties from oil stuff split with my siblings. Turbotax online is asking if it’s QBI and that’s confusing. Any help or advice is appreciated. Thank you.

[HelenC12]

The Qualified Business Income (QBI) deduction, applies to Schedule C filers (sole proprietorships and other self-employed businesses), LLCs, partnerships, S corporations, estates, and trusts. Certain rental enterprises may also qualify. Corporations are not eligible because they received their own tax breaks under the TCJA.

• That said, not every eligible business automatically qualifies for the deduction. In particular, some types of service businesses (SSTBs) are disqualified once the taxable income on the return exceeds $220,050 ($440,100 if filing jointly).
• The deduction amount depends on the taxpayer's total taxable income, which includes wages, interest, capital gains (etc.) in addition to income generated by the business.

When you enter your 1099-MISC, enter the income in Box 2 - Royalties. On the following screen, choose the source of your royalty income:

• Investment income from property you own – This includes natural resources extracted from your property by a third party who leases your property, as well as royalties from intellectual property that you didn't create yourself. This gets reported on Schedule E
• Royalty income from your business, including artist royalties or operating a natural resources business (Schedule C) – This includes income from natural resources that you extract from your property as well as royalty payments from intellectual property you created as an inventor, writer, artist, and so forth. This gets reported on Schedule C

Once you've selected the proper classification, follow the onscreen instructions.

[bobi456]

Just for clarification I choose Box 2, “Investment income from property you own ” and say not to QBI? Thank you. 

[HelenC12 · Accepted solution]

If this is an investment and not a Service, Trade, or Business that you engage in, the Royalty Income from an oil refinery does not qualify for QBI.

Income eligible for QBI does not include items such as:

• Items that are not properly includable in taxable income
• Investment items such as capital gains or losses
• Interest income not properly allocable to a trade or business
• Wage income
• Income that is not effectively connected with the conduct of business within the United States
• Commodities transactions or foreign currency gains or losses
• Certain dividends and payments in lieu of dividends
• Income, loss, or deductions from notional principal contracts
• Annuities, unless received in connection with the trade or business
• Amounts received as reasonable compensation from an S corporation
• Amounts received as guaranteed payments from a partnership
• Payments received by a partner for services other than in a capacity as a partner
• Qualified REIT dividends
• PTP income