You are allowed to deduct any expenses directly related to this income. Select your Royalty income then select this expense.
I entered the productions taxes under Other Taxes. However, even though I entered all information from the 1099-Misc forms for rents and royalties, when I ran a review I am now being told that rents and royalties cannot be on the same Schedule E. Does this mean I need to make a separate Schedule E? If so, how do I do that?
Go back and check your 1099-Misc entry for Royalties. You need to indicate that it is for 'Royalties' with an amount in Box 2.
Here's more info on How to Enter 1099-Misc for Royalty.
I have two 1099-Misc forms. One form has rents only, and the other has rents and royalties. When I followed the step-by-step procedure, I came up with three 1099-Misc worksheets. All information from those three forms was transferred to Schedule E. However, I am receiving an error message stating that rents and royalties must be separate. What am I doing wrong?