Answer 'No' if your Form 1099-MISC reports only your share of the royalty income and you are not transferring any part of that income to someone else.

You can also use depletion as an expense for this royalty income.

Percentage Depletion Allowance

For oil and gas royalty owners, percentage depletion is calculated using a rate of 15% of the gross income based on your average daily production of crude oil or natural gas, up to your depletable oil or natural gas quantity.

This will be entered on your Schedule E - Sign into TurboTax

Click on search at top right and enter schedule e > Press enter > Click on Jump to schedule e
Click Yes - click appropriate box then Continue - Edit or Add your property
Confirm information and Continue until you complete this section

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DaveF1006

Level 15

Yes, this is how to report this income and claim the expenses that are associated with this income. Before we begin this process, delete your 1099-MISC where you entered before. i just want to make sure we have a clean copy before proceeding. To delete, go to tax tools>tools>delete a form>1099-MISC.

Now open Turbo tax if it is not already opened
Go to federal>income and expenses>rental properties and royalties>Rental Properties and Royalties (Sch E)
What are you here to report? Royalty
Then it will ask information where this royalty is located. You may have entered this already but if you haven't, this may be useful.
Then answer the next few questions when it asks more information about your royalty.
I know you asked earlier about a question that asked if you were a partial owner. Here you will say no if all of the income on the 1099-MISC is your income.
Once the profile is complete, it will ask about your income. Here is where the 1099-MISC information is entered. If this is the path you followed before, then forgive me for listing this. I just wish to make sure you do this 100% correctly.
Keep continuing in the return. You are not done yet.
After an explanation on the difference between assets and expenses, you can begin listing your expenses regarding taxes or products. Please note, if there was federal income tax withheld, there is a section in Box 4 of your 1099-MISC to enter that. Property taxes are entered as expenses.
As you scroll through expenses, taxes are at top of the list. All property taxes will be listed here.
As you scroll through remaining expenses, if there is a particular category not listed here, at the bottom of the form is miscellaneous expenses. You could list these here with a brief explanation.
I hope this helps.

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contreras432Author

Level 2

On my 1099 Misc for rhe royalties i noticed it did a depletion? Is that a must

DawnC

Level 15

Yes, you need to take the tax deduction because you must reduce the basis of your property by the depletion allowed or allowable, whichever is greater, but not below zero.

If you have an economic interest in a mineral property or standing timber, you can take a deduction for depletion. More than one person can have an economic interest in the same mineral deposit or timber. In the case of leased property, the depletion deduction is divided between the lessor and the lessee. You have an economic interest if both the following apply.

You have acquired by investment any interest in mineral deposits or standing timber.
You have a legal right to income from the extraction of the mineral or cutting of the timber to which you must look for a return of your capital investment.

A contractual relationship that allows you an economic or monetary advantage from products of the mineral deposit or standing timber is not, in itself, an economic interest. For more details on depletion deductions, see this IRS publication.

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Carl

Level 11

If the amount reported to you on the 1099-MISC was all yours, and you did not distribute any of it to anyone else entitled to a share of what "you" were paid, then you did not distribute any part of the amount reported on the 1099-MISC to anyone else.

But you are a partial owner, depending on the IRS definition of "partial owner". I would expect the program would need to know that, so that you claim only your share of the expenses and your share of the depletion.

(Whew!)