Can I deduct PA personal property taxes and cost of insurance on a PA oil/gas lease property that I am receiving royalties on?

[jkhomet]

I take the standard deduction

[Cynthiad66 · Accepted solution]

No.  In the case of a gas lease, you can deduct expenses you incur to create the gas lease, such as cost depletion, geological surveys or legal fees associated with the creation of the gas lease.  However, real estate taxes are not deductible expenses because they are personal expenses not directly related to the production of the rental or royalty payments.  In Pennsylvania, real estate taxes are imposed upon surface rights and improvements thereon.  Subsurface minerals such as oil and gas are not subject to real estate taxes.  Therefore, there are no real estate taxes that can be associated with the gas being extracted under the gas lease that could be used to reduce rental or royalty income for Pennsylvania personal income tax purposes.

[jkhomet]

Thank you!