topic Mineral rights taxes paid to another state in Investors & landlords

Mineral rights taxes paid to another state

kris_10_leigh — Sun, 09 Feb 2020 22:17:31 GMT

I live in MO and get a monthly check for oil mineral rights in TX. At the end of the year I get a tax statement from the county in TX where the mineral rights are located and am required to pay. Is there a place on my income taxes form to list the money I've already paid in taxes to the state of TX?

Re: Mineral rights taxes paid to another state

DaveF1006 — Sun, 09 Feb 2020 22:31:26 GMT

Yes, when you report this as Royalty income, There is a place in Turbo Tax where you can report expenses against your royalty income. County tax is an expense you can report to reduce your taxable income of your Royalty.

1)Select the federal tab, then go to wages and income.

2) Scroll to Rentals, Royalties and Farms click on the drop down that says show more

3) Select Rental Properties and Royalties (Sch E) Select start

4) Then you will go through a series of questions regarding your royalty property. Here is where you will enter your income or expenses. Note, your income will probably be already entered from another tax document. Here you would just enter your royalty information and enter the tax as an expense once you reach the expense portion of your royalty income.

Re: Mineral rights taxes paid to another state

kris_10_leigh — Sun, 09 Feb 2020 23:13:38 GMT

Got it! Thank you very much!

Re: Mineral rights taxes paid to another state

kris_10_leigh — Mon, 10 Feb 2020 19:20:25 GMT

I've run into a snag. I forgot to mention previously that I receive two royalty checks from two different companies. They've both switched hands in the last year so I have four different companies to enter this year. I'm still stuck on how to get to the proper place on my form to enter the taxes I've paid to the county in Texas where my mineral rights are. Some how I have the taxes I've paid attached to one of the companies I get a royalty check from and that's not correct.

Re: Mineral rights taxes paid to another state

JulieS — Mon, 10 Feb 2020 19:27:56 GMT

The solution above is correct.

If you want to review each 1099-MISC, do so in the Rentals & Royalties section. After the income amounts, there are options to enter expenses, so you can enter the taxes as expenses to the royalty for which they are paid.

Re: Mineral rights taxes paid to another state

kris_10_leigh — Mon, 10 Feb 2020 19:35:03 GMT

But how do I do this when the taxes aren't attached to any of the companies from which I receive a check? I've got 4 different companies listed this year, usually it's just 2. The taxes I paid are paid to a county tax assessor/collector in TX where the mineral rights are located so I can't really attach the taxes I've paid to the county to any of these companies that I get a check from. I didn't pay the taxes to the entities that issued my checks.

Re: Mineral rights taxes paid to another state

JulieS — Mon, 10 Feb 2020 19:43:08 GMT

Maybe I am not understanding you at all. You are paying these taxes because of the mineral rights, aren't you? If yes, they are royalty expenses for the associated royalty.

If these taxes have absolutely nothing to do with the royalties or mineral rights, then you would enter them as itemized deductions, under state and local taxes.

Re: Mineral rights taxes paid to another state

kris_10_leigh — Mon, 10 Feb 2020 19:55:10 GMT

I assume I am paying them because of the mineral rights I have in TX. I own nothing else in the state of TX. I live in MO. The tax statement I got from TX lists that I'm paying taxes of "x" amount distributed to the county, the hospital, the school district, lateral road, and water.

Re: Mineral rights taxes paid to another state

JulieS — Mon, 10 Feb 2020 20:22:54 GMT

Yes, exactly that is a royalty expense for the property located in that county.

Re: Mineral rights taxes paid to another state

kris_10_leigh — Mon, 10 Feb 2020 21:11:41 GMT

I'm still unclear where this goes on my income taxes or if it even qualifies. It doesn't appear to be tied to any of the companies that sent me a check in 2019.

Re: Mineral rights taxes paid to another state

ThomasM125 — Mon, 10 Feb 2020 21:15:30 GMT

Your enter the 1099-Misc the mineral rights are reported on, you should have an option to enter expenses associated with the income.

Re: Mineral rights taxes paid to another state

kris_10_leigh — Mon, 10 Feb 2020 21:28:36 GMT

We appear to be running around in circles on this topic. I'm not trying to be difficulty, just want to make sure I do this correctly. It doesn't make sense to put these taxes where you're saying because I would have to know how to divide up the taxes I've paid and I have no idea how much to put for each company (there were 4 last year) that I got a check from in 2019. I paid taxes to the county in TX, why would I enter it as an expense to the companies that issued me royalty checks?

Re: Mineral rights taxes paid to another state

DaveF1006 — Mon, 10 Feb 2020 22:10:21 GMT

Was there just one 1099 MiSC reporting one royalty payment or were there several 1099's issued? if it was one Royalty Payment, then you are entering Taxes paid for that Royalty payment as an expense against the income of that payment. it is not an tax expense to the company, but it is a tax expense to you for you to claim to reduce your taxable income from the royalty. it doesn't matter if you paid one jurisdiction or 4 jurisdictions.

If you have more than one 1099 MISC, then each royalty payment will need to be reported separately, along with the taxes paid from each royalty payment. If you just have one 1099 MISC, report the total taxes paid against the Royalty payment and don't try to split hairs in allocating tax payments between the jurisdictions.

Re: Mineral rights taxes paid to another state

kris_10_leigh — Tue, 11 Feb 2020 00:29:52 GMT

I have four 1099-MISC. On each 1099-MISC the only thing listed in any of the boxes is in Box 2 (royalties). No taxes of any kind are listed on any of the four 1099-MISC. I have each reported separately on my income tax form right now. I paid one lump sum to the county in TX where the mineral rights are located. My issue is how am I supposed to know how much of that lump sum is to go to "expenses" on each of the four separate royalties? You guys keep saying to list the taxes I paid as "expenses" on each royalty payment, but I don't have that information. Just the "x" amount that I paid to the county.

Re: Mineral rights taxes paid to another state

JulieS — Tue, 11 Feb 2020 00:36:33 GMT

If you have no idea how much is related to each property, just divide the total by four and claim 1/4 of the taxes for each property. It is all added back together on Schedule E anyway.

Re: Mineral rights taxes paid to another state

kris_10_leigh — Tue, 11 Feb 2020 00:57:03 GMT

Ok. That is what I will do. Thank you all for being so patient and for your help.

Re: Mineral rights taxes paid to another state

chastity_lashure — Sat, 12 Feb 2022 18:55:24 GMT

Very informative- quick and easy explanation.

Re: Mineral rights taxes paid to another state

Frank_1 — Mon, 15 Apr 2024 01:00:56 GMT

Follow up question - If I live in one state and receive an oil lease payment from another state, am I required to file/pay taxes on that oil lease bonus payment? I understand the oil lease bonus payment is income and gets included on my Federal taxes, just trying to figure out if I owe money to the state where the property is. (no oil is being produced, they just want to lease the minerals in case there is something) Thanks

Re: Mineral rights taxes paid to another state

PatriciaV — Mon, 15 Apr 2024 12:39:14 GMT

It depends on the state, as some states require everyone to file if they received income sourced in that state. Others have a minimum income requirement to file. You might check with the state where the mineral rights reside. Here's a list of State Departments of Revenue.

@Frank_1