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Oil & Gas Royalties Passive Income Allowed Expenses

PR188 — Mon, 18 Nov 2024 23:13:42 GMT

I own and reside on a residential property and receive Oil & Gas Royalties (documented via 1099-MISC, Box 2). May I expense my mortgage interest and real estate tax on Schedule E?

Re: Oil & Gas Royalties Passive Income Allowed Expenses

DaveF1006 — Mon, 13 Jan 2025 20:08:02 GMT

No. The oil and gas property is on your land separate from your residential property.

Re: Oil & Gas Royalties Passive Income Allowed Expenses

PR188 — Mon, 13 Jan 2025 20:41:50 GMT

Thank you for your reply.

Perhaps I wasn't clear ... It is my residential property (with a mortgage and property taxes) that is receiving the oil & gas royalties. There is not a separate property account with the county or state for an oil & gas property. Does this make a difference?

Re: Oil & Gas Royalties Passive Income Allowed Expenses

DaveF1006 — Mon, 19 May 2025 17:15:03 GMT

No, that should not make a difference. You are only concerned about reporting the royalty from the lease and the only expenses you may deduct are intangible drilling and development costs, operating expenses, geological and geophysical expenses, production taxes, and depletion expenses. in other words, any direct expense related to the operation of the oil and gas lease.

Re: Oil & Gas Royalties Passive Income Allowed Expenses

PR188 — Wed, 15 Jan 2025 22:28:45 GMT

Thank you! You have given me much more information than I've ever been able to obtain from others or find on my own.