I sold inherited mineral rights for property in Oklahoma. I'm resident of Indiana. Should this income be reported in OK or IN?

[Phillip1 · Accepted solution]

This will be taxable in both states. However, Indiana should give you a tax credit for the taxes you will have to pay to the state of Oklahoma (if the income from the sale is more than 1,000 dollars).

For non-residents of Oklahoma, Oklahoma source income is any of the following items:

1. Salaries, wages and commissions for work performed in Oklahoma. 
2. Income from an unincorporated business, profession, enterprise or other activity as the result of work done, services rendered, or other business activities conducted in Oklahoma.* 
3. Distributive share of the Oklahoma part of partnership income, gains, losses or deductions.*
4. Distributive share from Sub-chapter S Corporations doing business in Oklahoma.* 
5. Net rents and royalties from real and tangible personal property located in Oklahoma. 
6. Gains from the sales or exchanges of real and tangible personal property located in Oklahoma. 
7. Income received from all sources of wagering, games of chance or any other winnings from sources within this state. Proceeds which are not money shall be taken into account at fair market value.

The sale of mineral rights property located in OK would qualify as OK source income, and (assuming the gain on the sale is greater than 1,000 dollars) this requires you to file an OK tax return.

Every state has a "credit for taxes paid in other states" in place to account for the inequity of having to pay tax to a state where you have source income and in your state of residence.

In TurboTax, prepare the Oklahoma first, and TurboTax will transfer the needed information to the Indiana return to calculate the credit for taxes paid to Oklahoma.