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null159
New Member

I received a 1099 misc from an energy company that put a wind turbine on my land. I have a rental agreement but the payment was listed as other income. Where do I repor

 
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GeoffreyG
New Member

I received a 1099 misc from an energy company that put a wind turbine on my land. I have a rental agreement but the payment was listed as other income. Where do I repor

The answer to your question is that you should treat this income as a Form 1040, Schedule E "royalty" item.  In other words, you will enter your wind turbine income onto Schedule E, Part 1, which will then "flow" back onto your main Form 1040 tax return, under Line 17, as ordinary taxable income -- but not subject to Social Security or Medicare taxes, as would self-employment income.

Furthermore, the reason we want to enter this as "royalty" rather than as "rental" income (even though both types of income are reported on the same Schedule E), is that we need to avoid any issues with depreciation or complications thereof.  Land rights, you see, which is what you are really renting to the wind farm company, does not ever depreciate for tax purposes.  Thus, royalty income is the appropriate classification here.

To help you get started with the data entry for Schedule E, you can follow these steps.

First, open up your TurboTax tax return and be working on it anywhere.  Second, locate the Find / Search box on your screen.  Third, type in the exact search words "schedule e" and click the button.  Fourth, click the "Jump To" link that will appear in the search results beneath.  Fifth, click on the "Continue" button and proceed to follow all of the on-screen instructions and subsequent questions that will appear in sequence.

You will further want to enter your royalty income as a type that is classified as "None of the Above" in TurboTax.  Again, doing so will avoid unnecessary complications and distractions in the program . . . in this instance something called "depletion," which is the natural resource equivalent (roughly) to depreciation of a rental property.  However, the wind itself never depletes, just as land never depreciates for tax purposes, and so that is how you will want to answer the TurboTax questions.

Similarly, despite whatever box may be used on your Form 1099-MISC by the wind farm company, you will want to enter your "rent / royalty" income in the manner just described, as that will ensure the proper tax treatment on Schedule E, and on your overall tax return.

You may additionally wish to read the following IRS.gov webpage, which has some useful information on natural resource property, as it relates to income taxes.

https://www.irs.gov/uac/newsroom/tips-on-reporting-natural-resource-income


Finally, please see the attached screen-capture images below for a visual guide to making your data entries.  While only (2) of the main steps are shown here, the rest of the in-program TurboTax questions should be relatively easy to answer.  Simply click the images to open and view.

Thank you for asking about this important subject.


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1 Reply
GeoffreyG
New Member

I received a 1099 misc from an energy company that put a wind turbine on my land. I have a rental agreement but the payment was listed as other income. Where do I repor

The answer to your question is that you should treat this income as a Form 1040, Schedule E "royalty" item.  In other words, you will enter your wind turbine income onto Schedule E, Part 1, which will then "flow" back onto your main Form 1040 tax return, under Line 17, as ordinary taxable income -- but not subject to Social Security or Medicare taxes, as would self-employment income.

Furthermore, the reason we want to enter this as "royalty" rather than as "rental" income (even though both types of income are reported on the same Schedule E), is that we need to avoid any issues with depreciation or complications thereof.  Land rights, you see, which is what you are really renting to the wind farm company, does not ever depreciate for tax purposes.  Thus, royalty income is the appropriate classification here.

To help you get started with the data entry for Schedule E, you can follow these steps.

First, open up your TurboTax tax return and be working on it anywhere.  Second, locate the Find / Search box on your screen.  Third, type in the exact search words "schedule e" and click the button.  Fourth, click the "Jump To" link that will appear in the search results beneath.  Fifth, click on the "Continue" button and proceed to follow all of the on-screen instructions and subsequent questions that will appear in sequence.

You will further want to enter your royalty income as a type that is classified as "None of the Above" in TurboTax.  Again, doing so will avoid unnecessary complications and distractions in the program . . . in this instance something called "depletion," which is the natural resource equivalent (roughly) to depreciation of a rental property.  However, the wind itself never depletes, just as land never depreciates for tax purposes, and so that is how you will want to answer the TurboTax questions.

Similarly, despite whatever box may be used on your Form 1099-MISC by the wind farm company, you will want to enter your "rent / royalty" income in the manner just described, as that will ensure the proper tax treatment on Schedule E, and on your overall tax return.

You may additionally wish to read the following IRS.gov webpage, which has some useful information on natural resource property, as it relates to income taxes.

https://www.irs.gov/uac/newsroom/tips-on-reporting-natural-resource-income


Finally, please see the attached screen-capture images below for a visual guide to making your data entries.  While only (2) of the main steps are shown here, the rest of the in-program TurboTax questions should be relatively easy to answer.  Simply click the images to open and view.

Thank you for asking about this important subject.


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